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Abstract Proceedings of MODAV International Conferences on Accounting Issue: 1 / December 2017
Abstract Proceedings of the 14th International Conference on Accounting
Auditing for Development and Sustainability
Edited by Beyhan MARŞAP and Pınar OKAN GÖKTEN
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Editors
Prof. Dr. Beyhan MARŞAP
Gazi University
Department of International Trade
Ankara, Turkey
Dr. Pınar OKAN GÖKTEN
Gazi University
Department of International Trade
Ankara, Turkey
@2017 PUBLISHED ONLINE
Date of Publication: December 10, 2017
Conference webpage : iac2017.modav.org.tr
Publication type : Abstract proceedings of MODAV conferences
Paper acceptance process : A double blind peer-reviewed process conducted by an international
panel of reviewers
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In collaboration with
Accounting Academician Collaboration Foundation of Turkey
Albania University of Tirana Faculty of Economy
Turkish Court of Accounts
Republic of Albania, The Supreme Audit Institution
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Sponsored by
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Scientific Committee
Prof. Dr. Durmuş Acar, Mehmet Akif Ersoy University
Prof. Dr. Nalan Akdoğan, Baskent University
Prof. Dr. Rafet Aktaş, Yıldırım Beyazıt University
Prof. Dr. Aylin Poroy Arsoy, Uludağ University
Prof. Dr. Jorgji Bollano, The Supreme Audit Institution
Prof. Dr. Çağnur Balsarı, Dokuz Eylül University
Prof. Dr. Nuran Cömert, Marmara University
Prof. Dr. Sotiraq Dhamo,Tirana University
Prof. Dr. Fatih Coşkun Ertaş, Gazi Osman Paşa University
Prof. Dr. Giuseppe Galassi, Parma University
Prof. Dr. Ümit Gücenme Gençoğlu, Uludağ University
Prof. Dr. Recep Güneş, İnönü University
Prof. Dr. Kadir Gürdal, Ankara University
Prof. Dr. Zeynep Hatunoğlu, Kahramanmaraş University
Prof. Dr. Vjollca Hysi, Tirana University
Prof. Dr. Yoshiaki Jinnai, Tokyo Keiazai University
Prof. Dr. Vjollca Karapici, Tirana University
Prof. Dr. Reşat Karcıoğlu, Atatürk University
Prof. Dr. Tonin Kola, Tirana University
Prof. Dr. Dhori Kule, Tirana University
Prof. Dr. Ganite Kurt, Gazi University
Prof. Dr. Juan Lanero, Leon University
Prof. Dr. Lindita Lati, The Supreme Audit Institution
Prof. Dr. Shyqyri Llaci, Tirana University
Prof. Dr. Beyhan Marşap, Gazi University - MODAV
Prof. Dr. Mehmet Özbirecikli, Mustafa Kemal University
Prof. Dr. Yıldız Özerhan, Gazi University
Prof. Dr. Seval Selimoğlu, Anadolu University
Prof. Dr. Kozeta Sevrani, Tirana University
Prof. Dr. Ingrid Shuli, Tirana University
Prof. Dr. Hülya Talu, İstanbul Gelişim University
Prof. Dr. Fatma Tektüfekçi, Dokuz Eylül University
Prof. Dr. Zeynep Türk, Korkut Ata University
Prof. Dr. Süleyman Yükçü, Dokuz Eylül University
Dr. Bujar Leskaj, The Supreme Audit Institution
Dr. Renald Muca, The Supreme Audit Institution
Luljeta Nano, CIPFA
Assoc. Prof. Dr. Ümmühan Aslan, Şeyh Edebali University
Assoc. Prof. Dr. Bilge Leyli Elitaş, Yalova University
Assoc. Prof. Dr. Deniz Umut Erhan, Başkent University
Assoc. Prof. Dr. Seyhan Çil Koçyiğit, Gazi University
Assoc. Prof. Dr. Edlira Luci, Tirana University
Assoc. Prof. Dr. Dina Lvova, Saint Petersburg University
Assoc. Prof. Dr. Manjola Naco, The Supreme Audit Institution
Assoc. Prof. Dr. Fevzi Serkan Özdemir, Ondokuz Mayıs University
Assoc. Prof. Dr. Arzu Özsözgün, Yıldız Teknik University
Assoc. Prof. Dr. Zafer Sayar, TURMOB
Assoc. Prof. Dr. Şerife Subaşı, Şeyh Edebali University
Assoc. Prof. Dr. İlker Kıymetli Şen, İstanbul Ticaret University
Assoc. Prof. Dr. Şükran Tanç, Nevşehir Hacı Bektaş Veli Un.
Assoc. Prof. Dr. Serap Yanık, Gazi University
Irena Islami, The Supreme Audit Institution
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Organizing Committee
Prof. Dr. Beyhan Marşap, Gazi University, MODAV, Turkey
Prof. Dr. Mehmet Özbirecikli, Mustafa Kemal University, Turkey
Prof. Dr. Yıldız Özerhan, Gazi University, Turkey
Assoc. Prof. Dr. Rezarta Shkurti, Tirana University, Albania
Assoc. Prof. Dr. Serap Yanık, Gazi University, Turkey
Assoc. Prof. Dr.Seyhan Çil Koçyiğit, Gazi University, Turkey
Julian Naqellari, Tirana University, Albania
Asst. Prof. Can Öztürk, Çankaya University, Turkey
Asst. Prof. Soner Gökten, Başkent Üniversity, Turkey
Dr. Mirela Miti, Tirana University, Albania
Dr. Linda Cepani, Tirana University, Albania
Dr. Pınar Okan Gökten, Gazi University, Turkey
Ina Sokoli, The Supreme Audit Institution, Albania
Almida Kafia, The Supreme Audit Institution, Albania
Res.Ass. Burcu Nazlıoğlu, Gazi University, Turkey
Behar Barjamaj, Tirana University, Albania
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Content
Conference Program ......................................................................................................................................... i
International Auditing Standards for Publıc Sector and an Assessment about Turkish Supreme Audit
Institution’s (Turkish Court of Accounts (TCA) Auditing Procedures in Comparison with the International
Auditing Standards / Prof. Dr. Nalan AKDOĞAN ......................................................................................... 1
Accountants and Auditors as Providers of Assurance and Related Services – A SWOT Analyses / Prof.Dr.
Ingrid SHULI - Dr. Linda GJIKA ................................................................................................................... 5
Strategic Planning as a Tool for Accountability in Turkish Public Administration / Ahmet TANER ............ 7
Case Study: Performance Audit on Ecosystem Preservation of Prespa National Park / Dr. Aulent GURI .. 11
The Financial Audit Between Professional Liberalism and Regulations / Prof. Dr. Alexandru TRIFU - Prof.
Dr. Moise CINDEA ....................................................................................................................................... 13
A Review on Audit Quality / Elsa TANUSHI .............................................................................................. 16
Ethics Education and Vocational Training Process of Accounting and Auditing Professions in Turkey: A
Historical Perspective / Prof. Dr. Mehmet ÖZBİRECİKLİ - Assoc. Prof. Dr. Dr. İlker Kıymetli ŞEN ....... 18
International Cooperation for Accountancy Qualifications in Albania / Brisejda RAMAJ(ZENUNI) ......... 23
Empirical Analysis of Auditor and Audit Firm Rotation Practices in BIST 100 / Assist. Prof. Dr. Burcu
GÜROL - Tayfun TÜYSÜZOĞLU .............................................................................................................. 26
A Research on the Students in Ankara, Gazi, Hacettepe Universities for Effect of the Audit Course on the
Ethical Dilemma, Decision-Making and Financial Literacy / Res. Ass. Bahan YENİLMEZ - Ceyhan
ECEVİT ......................................................................................................................................................... 29
The Issues to be Taken into Consideration in Independent Audit of Profit and Loss Statement and Other
Comprehensive Income Statements for the Public Interest Entities and the Others / Assoc. Prof. Dr. Dr.
Deniz Umut DOĞAN (ERHAN) .................................................................................................................. 31
The Effect of the Independent Audit Report on the Value of Public Offered Banks' Share: The Case of
Turkey / Assoc. Prof. Dr. Dr. Adalet HAZAR - Assoc. Prof. Dr. Dr. Şenol BABUŞCU - Dr. M. Oğuz
KÖKSAL ....................................................................................................................................................... 34
Internal Audit Quality in 5S Environment / Orgeta HARRUNAJ ................................................................ 38
Analysis of Disclosures about Risk Management and Risk Measures within the Annual Reports of
Manufacturing Companies Listed on Borsa İstanbul 100 Index / Res. Asst. Osman AYDIN - Assoc. Prof.
Dr. Dr. Serap YANIK - Prof. Dr. Nalan AKDOĞAN................................................................................... 41
External Quality Assessment of Internal Audit in the Albanian Public Sector / Dr. Kesjana HALILI - Dr.
Dritan FINO - Prof. Dr. Vjollca KARAPICI ................................................................................................ 46
Internal Auditing – An Effective Approach in Developing Sustainability Management Systems / Prof.Dr.
Suzana GUXHOLLI - Anisa VRENOZI ....................................................................................................... 51
Regularity Audit in Private Budgeted Organization in Turkey and an Application of Turkish Standards
Institution / Assist. Prof. Dr. Dr. Zeki YANIK - Prof.Dr. Beyhan MARŞAP - Assoc.Prof.Dr. S. Serap
YANIK .......................................................................................................................................................... 53
Analysis of Transparency Reports of Independent Auditing Institutions in Turkey / Prof. Dr. Zeynep TÜRK
- Res. Asst. Erdem KÜRKLÜ ....................................................................................................................... 57
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Auditor Opinion in the Frame of Baumeister’s Ego Depletion Theory / Dr. Pınar OKAN GÖKTEN ......... 58
The Effects of Internal Control System on Corporate Governance: Application in Companies within the
Scope of BIST Corporate Governance Index / Figen CANBAY ÇİĞDEM - Prof. Dr. Recep GÜNEŞ -
Assoc. Prof. Dr. Dr. Yusuf Cahit ÇUKACI .................................................................................................. 61
Sustainability Reporting in the Light of European Union Regulation and Recent Trends / Prof. Dr. Hasan
Kaval ............................................................................................................................................................. 64
The Role of Internal Auditing in Integrated Reporting / Assist. Prof. Dr. Hakan ÖZÇELİK - Assist. Prof.
Dr. Mahmut Sami ÖZTÜRK ......................................................................................................................... 67
Integrated Reporting of Global Corporations: A Content Analysis Based on Integrated Reporting Examples
Database from 2011 to 2016 / Prof. Dr. Seval KARDEŞ SELİMOĞLU - Res. Ass. Gül YEŞİLÇELEBİ .. 69
A New Perspective in Public Sector Auditing: Ethics Audit / Yaşar UZUN ................................................ 70
The Certification of Tax Declarations – The New Role of Auditors. Albania’s Case / Marsela
SHPERDHEJA - Prof. Dr. Sotiraq DHAMO ................................................................................................ 73
The Effects of Supreme Audit Institutions’ Independency on Fiscal Sustainability: A Survey about Turkey /
Sinem YALÇIN............................................................................................................................................. 76
Auditors’ Perception of Expanded Audit Reports: Is It Useful or Not? / Assist. Prof. Dr. Ayşe Nilgün
ERTUĞRUL - Res. Ass. Gizem ÇOPUR VARDAR .................................................................................... 78
Impact of New IFRS 9 Standard on Bank Audits / Medine TÜRKCAN - Res.Ass. Buket ATALAY -
Assist. Prof. Dr. Soner GÖKTEN ................................................................................................................. 83
Reporting and Audit of EU Projects in Accordance with IPA II / Dr. Neslihan ÇETİNKAYA ................... 86
A Review of the Classification and Amortization of the Hydropower Concession’s Assets / Dr. Majlinda
MAQELLARI - Prof. Dr. Ingrit SHULI ....................................................................................................... 88
Preparing and Auditing Financial Statements – Legal and Penal Consequences for the Auditors in Albania /
Dr. Mirela UJKANİ - Prof. Asoc. Dr. Rezarta SHKURTİ ............................................................................ 91
Reporting and Auditing of Financial and Non-Financial Information in the Frame of Corporate
Sustainability / Prof. Dr. Nalan AKDOĞAN - Asspoc.Prof. Dr. S. Serap YANIK ...................................... 95
Comparison of Participation and Conventional Banks which are Operating in Turkey in Terms of
Sustainability / Assist. Prof. Dr. Utku ŞENDURUR - Assist. Prof. Dr. Fatma TEMELLİ ......................... 100
Audit Firms’ Adoption Level of Cloud Computing: A Qualitative Research in Antalya / Ayşegül CİĞER -
Bülent KINAY ............................................................................................................................................ 103
ALSAI Challenges Towards Auditing for a Sustainable Development / Prof. Dr. Jorgji BOLLANO ....... 104
A Proposal of Integrated Report Pattern in a Company in the Scope of Sustainability / Prof. Dr. Durmuş
ACAR - Prof. Dr. Hayrettin USUL - Assist. Prof. Dr. Mahmut Sami ÖZTÜRK ....................................... 106
Stakeholder Activism as a Form of Social Monitoring Mechanism for Sustainable Business / Res. Ass.
Melissa N. CAGLE - Prof. Dr. Cağnur K. BALSARI ................................................................................ 109
Integrated Reporting and Social Auditing Concept / Erkan ÖZTÜRK - Ömer Faruk GÜLEÇ .................. 114
Enhancing the Performance of Projects with Foreign Funding / Ina SOKOLI ........................................... 118
Lending in Foreign Markets / Lirida CAKU ............................................................................................... 122
Being A Good Auditor / Jonida MUKA...................................................................................................... 125
IT Audit – Introduction of the IT Audit in an Organization / Elda HOXHAJ ............................................ 129
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Green Banking Practices and a Rating Application on Turkish Banking Sector / Prof. Dr. Nalan
AKDOĞAN - Serkan Aziz ORAL - Ozan GÜLHAN ................................................................................ 131
Relationship between Company Audit Results and Board of Directors Components: Examination in Retail
and Cement Sector / Tuba Derya BAŞKAN ............................................................................................... 133
Determination of the Materiality Levels of Group Companies in the Scope of Independent Auditing
Standards – Bayesian Group Audit Model / Prof. Dr. Nalan AKDOĞAN - Prof. Dr. Zehra MULUK ...... 138
A Research on the Failure Factors Reported in Independent Audit Reports of Delisted Companies in Borsa
Istanbul / Assist. Prof. Dr. Servet ÖNAL - Res. Ass. Murat MAT ............................................................. 144
A Research on the Applicability of Mandatory Rotation Applied in Independent Auditing on Certified
Public Accountants / Prof. Dr. Fatih Coşkun ERTAŞ - İbrahim ÇİDEM - Res. Ass. Oktay ÖZKAN ....... 145
The Challenges of Audit Performance on Public-Private Partnership Contracts - Albanian Case / Prof. Dr.
Manjola NACO - Dr.Blerta ZİLJA ...................................................................................................................... 148
Impact of IFRS 15 Revenue from Contracts with Customers on Shipping Companies: Reporting and
Auditing Issues / Assist. Prof. Dr. Seçil SİGALI - Assoc. Prof. Dr. Dr. Ali Fatih DALKILIÇ - Res. Ass.
Elif KORKMAZ - Res. Ass. Gönenç DEMİR ............................................................................................ 150
Implications of Tax Morale in Tax Compliance Behavior – Albania’s Case / Nertila CİKA - Fiona BALLA
- Prof. Dr. Sotiraq DHAMO ........................................................................................................................ 153
Big Data and Auditing / Prof. Dr. Yıldız ÖZERHAN - Assoc. Prof. Dr. Ümmühan ASLAN - Res. Ass.
Burcu NAZLIOĞLU ................................................................................................................................... 156
Auditing of Audit Quality Indicators in Electronic Environment, Their Declaration to the Public and
Suggestions for Training / Prof. Dr. Süleyman YÜKÇÜ - Özlem KOÇAKOĞLU .................................... 158
The Control and Auditing of E-Document, E-Journal and E-Ledger in Turkey in the Content of E-
Transformation Process / Prof. Dr. Fatma TEKTÜFEKÇİ ......................................................................... 160
Digital Auditors in Tax Auditing: Towards to E-Audit by E-Daybook / Assist. Prof. Dr. İlker
CALAYOĞLU ............................................................................................................................................ 163
Sustainable Development as a Human Right and Supreme Audit Institution / Mahmut GÜLER - Pınar
AKPINAR ................................................................................................................................................... 166
Interaction of Independent Audit Reports and Management Performance / Prof.Dr. Ali HALICI - Assoc.
Prof. Dr. Deniz Umut ERHAN ................................................................................................................... 167
The Effect of Institutional Social Responsibility within the Context of Sustainability Statements on
Profitability: A Research on BIST Sustainability Index / Prof. Dr. Azzem ÖZKAN - Assoc. Prof. Dr.
Şükran GÜNGÖR TANÇ - Bahşende MUCUK ......................................................................................... 170
Corporate Social Responsibility and Evidence in Annual Financial Reporting in Albania / Dr. Ervis BEJKO
- Prof As. Remzi SULO - Prof As. Albana JUPE ....................................................................................... 175
IPSAS vs National GAAP1: Differences and Challenges in Implementing IPSAS in Albanian Public Sector
/ Dr. Dritan FINO ........................................................................................................................................ 179
Money Laundering and Accounting Profession- Albania's Case / Prof. Dr. Sotiraq DHAMO - Igli TOLA
..................................................................................................................................................................... 182
Reporting and Auditing of Environmental Matters in the Scope of Sustainability Report / Dr. Banu
SULTANOĞLU - Prof. Dr. Yıldız ÖZERHAN .......................................................................................... 185
Auditing of Special Purpose Entities in Terms of International Taxation and Black Money / Çağrı Özgür
KARABUDAK - Assist. Prof. Dr. Soner GÖKTEN ................................................................................... 187
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Evaluation of Financial Information Manipulation for the Borsa Istanbul Companies Between 2010-2014 /
Dr. Eda TEKİN - Prof. Dr. Nalan AKDOĞAN .......................................................................................... 190
Analysis of Academic Studies in Big Four Refereed Accounting Journals Published in Turkey (2008-2017)
/ Müslime SÖZEN ....................................................................................................................................... 193
Analyzing International Standard on Auditing 570 “Going Concern” and Related Auditor’s Reports in
Terms of Turkish Auditing Standards / Assoc. Prof. Dr. Seyhan ÇİL KOÇYİĞİT - Assoc. Prof. Dr. Şükran
GÜNGÖR TANÇ - Assoc. Prof. Dr. Bilge Leyli ELİTAŞ ......................................................................... 199
Gender, Education, Tenure and Audit Opinion: Auditor’s Perspective / Dr. E. Serap KURT - Dr. Murat
OCAK ......................................................................................................................................................... 204
Effect of Industry 4.0 on Internal Audit / Dr. Bilal Zafer BERİKOL ......................................................... 211
Independent Audit in Capital Companies in the Context of Turkish Commercial Code / Dr. Mehmet Ali
AKSOY – Assoc. Prof. Dr. Emine Ebru AKSOY ...................................................................................... 212
i
Conference Program
1st DAY: OCTOBER 11, 2017
MAIN HALL
9.00 - 10.00 Registration
10.00- 11.00
Opening Speeches
Prof. Dr. Beyhan MARŞAP President of MODAV
Prof. Dr. Dhori KULE Dean Of Economic Faculty of Tirana University
Prof. Dr. Hysen CELA President, Albanian Institute of Statutory Auditors
A. Masis YONTAN President of Union of Chambers of Certified Public Accountants & Sworn-in
Certified Public Accountants in TURKEY
Prof.Dr. Lindita MİLO General Director of Supreme Audit Instution of Albania
Fikret ÇÖKER Vice President of Turkish Court of Accounts
11.00- 12.30
Keynote Speakers
Dr. Masum TÜRKER
Member of the Board of Union of Chambers of Certified Public Accounttants
Turkey and Member of the International Federation of Accountants (IFAC)
Board
Prof. Dr. Radosław IGNATOWSKI
Accounting Department, Management Faculty, University of Łódź (UŁ),
Poland Member of the Polish National Accounting Standards Committee –
Member of the Audit Oversight Committee in Poland
Prof.Dr. Ingrid SHULI
Member of National Accounting Council Albania, Member of Certified
Accountant Institute, Albania, Head of Accounting Department, Economic
Faculty, UT
12.30-13.45 LUNCH
ii
1st DAY: OCTOBER 11, 2017
MAIN HALL HALL 1 HALL 2
14.00 – 15.30
I. SESSION II. SESSION III. SESSION
Chairperson:
Dr. Masum TÜRKER
Chairperson:
Prof. Dr. Kozeta SEVRANI
Chairperson:
YMM Nurettin ÇEKİCİ
International Auditing
Standards for Public Sector and
an Assessment about Turkish
Supreme Audit Institution’s
(Turkish Court of Accounts (TCA)
Auditing Procedures in
Comparison with the
International Auditing
Standards
Nalan AKDOĞAN
The Financial Audit Between
Professional Liberalism and
Regulations
Alexandru TRİFU - Moise CİNDEA
Empirical Analysis of Auditor and Audit
Firm
Rotation Practices in BIST 100
“Denetimde Rotasyon Uygulamaları ve
BIST 100’de Yeralan Şirketlerin Denetim
Kuruluşu ve Denetçi Rotasyon
Uygulamalarının İncelenmesi”
Burcu GÜROL - Tayfun TÜYSÜZOĞLU
Accountants and
Auditors as Providers of
Assurance and Related
Services - A SWOT
Analyses
Ingrid SHULİ
Linda GJIKA
A Review on Audit Quality
Elsa TANUSHİ
A Research on the Students in Ankara,
Gazi, Hacettepe Universities for Effect of
the Audit Course on Ethical Dilemma,
Decision Making and Financial Literacy
“Denetim Dersinin Etik İkilem, Etik
Karar Alma Ve Finansal Okuryazarlık
Konularına Etkisine Yönelik Ankara-
Gazi-Hacettepe Üniversiteleri
Öğrencileri Üzerine Bir Araştırma”
Bahan YENİLMEZ
Ceyhan ECEVİT
Strategic Planning as a Tool for
Accountability in Turkish Public
Administration
Ahmet TANER
Ethics Education and Vocational
Training Process of Accounting and
Auditing Professions in Turkey: A
Historical Perspective
Mehmet ÖZBİRECİKLİ
İlker Kıymetli ŞEN
The Issues to be Taken into Consideratıon
in Independent Audit of Profit and Loss
Statement and Other Comprehensive
Income Statements for The Public
Interest Entities and the Others
“KAYİK ve KAYİK Dışı İşletmelerde Kar
Zarar Tablosu ve Diğer Kapsamlı Gelir
Tablosunun Denetiminde Dikkate
Alınacak Hususlar”
Deniz Umut ERHAN
Case Study: Performance Audit
on Ecosystem Preservation of
Prespa National Park
Aulent GURİ
International Cooperation for
Accountancy Qualifıcations in
Albania
Brisejda RAMAJ
The Effect of the Independent Audit
Report on the Value of Public Offered
Banks’ Share: The Case of Turkey
“Bağımsız Denetim Raporu’nun
Halka Açık Şirketlerde Firma
Değerine Etkisi - Türkiye
Örneği”
Adalet HAZAR
Şenol BABUŞCU
Oğuz KÖKSAL
15.30-16.00 COFFEE BREAK
iii
1st DAY: OCTOBER 11, 2017
MAIN HALL HALL 1 HALL 2
16.00-17.30
IV. SESSION V. SESSION VI. SESSION
Chairperson:
Prof. Dr. Radosław IGNATOWSKI
Chairperson:
Prof.Dr. Orhan SEVİLENGÜL
Chairperson:
Prof.Dr. Çağnur BALSARI
Internal Audit Quality in
5s Environment
Ortega HARRUNAJ
Regularity Audit in Private Budgeted
Organizations in Turkey and an
Application of Turkish Standards
Institution
“Türkiye’de Özel Bütçeye Tabi
Kuruluşlarda Düzenlilik Denetimi ve
Türk Standartları Enstitüsü
Uygulaması”
Zeki YANIK
Beyhan MARŞAP
Serap YANIK
Sustainability Reporting in the
Light of European Union
Regulation and Recent Trends
“Sürdürülebilirlik Raporlaması ve
Denetimde Son Trendler”
Hasan KAVAL
Analysis of Disclosures about
Risk Management and Risk
Measures within the Annual
Reports of Manufacturing
Companies Listed on Borsa
Istanbul 100 Index
Osman AYDIN - Serap YANIK
Nalan AKDOĞAN
Analysis of Transparency
Reports of Independent
Auditing Institutions in Turkey
“Türkiye’de Bağımsız Denetim
Kuruluşları Şeffaflık Raporları Analizi”
Zeynep TÜRK
Erdem
KÜRKLÜ
The Role of Internal
Auditing in Integrated
Reporting
“Entegre Raporlamada İç
Denetimin Rolü”
Hakan ÖZÇELİK
Mahmut Sami
ÖZTÜRK
External Quality Assessment of
Internal Audit in the Albanian
Public Sector
Kesjana HALİLİ
Dritan FİNO
Vjollca KARAPİCİ
Auditor Opinion in the Frame of
Baumeister’s Ego Depletion Theory
“Baumeister’ın Ego Tükenmesi Teorisi
Çerçevesinde Denetçi Yargısı”
Pınar OKAN GÖKTEN
Integrated Reporting of Global
Corporations: A Content Analysis
Based on Integrated Reporting
Examples Database from 2011 to
2016
“Küresel Kuruluşların
Bütünleşik (Entegre)
Raporlaması: Bütünleşik
(Entegre) Raporlama
Örnekleri Veritabanında
2011-2016 Yılları Arasında
Yayınlanan Raporların İçerik Analizi”
Seval Kardeş SELİMOĞLU
Gül YEŞİLÇELEBİ
Internal Auditing -An Effective
Approach in Developing
Sustainability Management
Systems
Suzana GUXHOLLİ
Anisa VRENOZİ
The Effects of Internal Control System
on Corporate Governance:
Application in Companies within
the Scope of BIST Corporate
Governance Index
“İç Kontrol Sisteminin Kurumsal
Yönetim Üzerindeki Etkileri: BIST
Kurumsal Yönetim Endeksi
Kapsamındaki
Şirketlerde Uygulama”
Figen Canbay ÇİĞDEM
Recep GÜNEŞ
Yusuf Cahit ÇUKACI
19.30 GALA DINNER
iv
2nd DAY: OCTOBER 12, 2017
MAIN HALL HALL 1 HALL 2
9.30-11.00
VII. SESSION VIII. SESSION IX. SESSION
Chairperson:
Prof.Dr.Lindita LATI
Chairperson:
Prof. Dr. Vjollca KARAPICI
Chairperson:
Prof.Dr.Zeynep TÜRK
A New Perspective in Public Sector
Auditing: Ethics Audit
Yaşar UZUN
Impact of New IFRS 9 Standard on
Bank Audits
Medine TÜRKCAN
Buket ATALAY
Soner GÖKTEN
Reporting and Auditing of
Financial and Non-
Financial Information in
the Frame of Corporate
Sustainability
“Kurumsal Sürdürülebilirlik
Kapsamında Finansal ve
Finansal Olmayan Bilgilerin
Raporlanması ve Denetimi”
Nalan AKDOĞAN
Serap YANIK
The Certifıcation of Tax Declarations-
The New Role of Auditors. Albania’s
Case
Marsela SHPERDHEJA
Sotiraq DHAMO
Reporting and Audit of EU Projects in
Accordance with IPA II
Neslihan ÇETİNKAYA
Comparison of Participation
and Conventional Banks
which are Operating in
Turkey in Terms of
Sustainability
“Türkiye’de Faaliyet Gösteren
Geleneksel Bankalar ve
Katılım Bankalarının
Sürdürülebilirlik Açısından
Karşılaştırılması”
Utku ŞENDURUR
Fatma TEMELLİ
The Effect of Supreme Audit
Institutions’ Independency on
Fiscal Sustainability: A Survey
about Turkey
“Yüksek Denetim Kurumlarının
Bağımsızlığının Mali Sürdürülebilirlik
Üzerindeki Etkisi: Türkiye Açısından
bir İnceleme”
Sinem YALÇIN
A Review of the Classification and
Amortization of the Hydropower
Concession’s Assets
Majlinda MAQELLARİ – Ingrid SHULİ
Audit Firms’ Adoption Level
of Cloud Computing: A
Qualitative Research in
Antalya
“Bağımsız Denetim
Firmalarının Bulut Bilişim
Uygulamalarını Benimseme
Düzeylerini Ölçmeye Yönelik
Nitel Bir Araştırma: Antalya
İli Örneği”
Ayşegül CİĞER - Bülent KINAY
Auditors’ Perception of Expanded
Audit Reports: Is It Useful or Not
Ayşe Nilgün ERTUĞRUL
Gizem ÇOPUR VARDAR
Preparing and Auditing Financial
Statements - Legal and Penal
Consequences for the Auditors in Albania
Mirela UJKANİ - Rezarta SHKURT
11.00-11.30 COFFEE BREAK
v
2nd DAY: OCTOBER 12, 2017
MAIN HALL HALL 1 HALL 2
11.30-13.00
X. SESSION XI. SESSION XII. SESSION
Chairperson:
Prof.Dr. Ingrid SHULI
Chairperson:
Prof. Dr. Sotiraq DHAMO
Chairperson:
Prof.Dr.Yıldız ÖZERHAN
ALSAI Challenges Towards Auditing
for a Sustainable Development
Jorgji BOLLANO
Enhancing the Performance of
Projects with Foreign Funding
Ina SOKOLİ
Green Bankıng Practıces and
a Ratıng Applıcatıon on
Turkısh Bankıng Sector
“Çevre Dostu Bankacılık
Uygulamaları ve Türk
Bankacılık Sektörü Üzerine
Derecelendirme Uygulaması”
Nalan AKDOĞAN
Serkan Aziz ORAL
Ozan GÜLHAN
A Proposal of Integrated Report
Pattern in a Company in Scope of
Sustainability
Durmuş ACAR
Hayrettin USUL
Mahmut Sami ÖZTÜRK
Lending in Foreign Markets
Lirida CAKU
Relationship between
Company Audit Results and
Board of Directors
Components: Examination in
Retail and Cement Sector
“Firmaların Denetim
Sonuçları İle Yönetim Kurulu
Bileşenleri Arasındaki İlişki:
Perakende ve Çimento
Sektöründe İnceleme”
Tuba Derya BAŞKAN
Stakeholder Activism as a Form of
Social Monitoring Mechanism for
Sustainable Business
Melissa N. CAGLE
Çağnur K. BALSARI
Being a Good Auditor
Jonida MUKA
Determination of the
Materiality Levels of Group
Companies in the Scope of
Independent Auditing
Standards – Bayesion
Group Audit Model
“Bağımsız Denetim
Standartları Kapsamında
Grup Şirketlerinin Önemlilik
Düzeylerinin Belirlenmesi”
Nalan AKDOĞAN
Zehra MULUK
Integrated Reporting and Social
Auditing Concept
Erkan ÖZTÜRK - Ömer Faruk GÜLEÇ
IT Audit – Introduction of the IT Audit
In an Organization
Elda HOXHAJ
A Research on the Failure
Factors Reported in
Independent Audit Reports of
Delisted Companies in Borsa
İstanbul
“Borsada İşleme Kapatılan
Firmaların Bağımsız Denetim
Raporlarında Yer Alan
Başarısızlık Faktörleri Üzerine
BIST’de Bir Araştırma”
Servet ÖNAL - Murat MAT
13.30-14.15 LUNCH
vi
2nd DAY: OCTOBER 12, 2017
MAIN HALL HALL 1 HALL 2
14.30-16.00
XIII. SESSION XIV. SESSION XV. SESSION
Chairperson
Prof.Dr.Nalan AKDOĞAN
Chairperson
Prof.Dr.Recep GÜNEŞ
Chairperson:
Prof.Dr. Beyhan MARŞAP
A Research on the
Applicability of Mandatory
Rotation Applied in
Independent Auditing on Certıfıed
Public Accountants
Fatih Coşkun ERTAŞ
İbrahim ÇİDEM - Oktay ÖZKAN
Big Data and Auditing
“Big Data ve Denetim”
Yıldız ÖZERHAN
Ümmühan ASLAN - Burcu NAZLIOĞLU
Sustainable
Development as a
Human Right and
Supreme Audit
Institution
“İnsan Hakkı Olarak
Sürdürülebilir Gelişme
ve Sayıştay Denetimi”
Mahmut GÜLER
Pınar AKPINAR
The Challenges of Audit
Performance on Public-Private
Partnership Contracts - Albanian
Case
Manjola NACO - Blerta ZİLJA
Auditing of Audit Quality Indicators in
Electronic Environment, Their
Declaration to the Public and
Suggestions for Training
“Denetim Kalitesi Göstergelerinin
Elektronik Ortamda Denetlenmesi,
Kamuoyu İle Paylaşılması ve Eğitimine
Yönelik Öneriler”
Süleyman YÜKÇÜ - Özlem KOÇAKOĞLU
Interaction of Independent
Audit Reports and
Management Performance
“Bağımsız Denetim Raporları
ve Yönetim Performansı
Etkileşimi”
Ali HALICI
Deniz Umut ERHAN
Impact of IFRS 15 Revenue from
Contracts with Customers on
Shipping Companies: Reporting
and Auditing Issues
Seçil SİGALI
Fatih DALKILIÇ
Elif KORKMAZ
Gönenç DEMİR
The Control and Auditing of E-Document,
E-Journal and E-Ledger in Turkey in the
Content of E-Transformation Process
“Türkiye’de E-Dönüşüm Süreci
Kapsamında E-Belge ve E-Defter
Kontrolü İle Denetimi”
Fatma TEKTÜFEKÇİ
The Effect of Institutional
Social Responsibility
within the Context of
Sustainability Statements
on Profitability: A Research
on BIST Sustainability
Index
“Sürdürülebilirlik
Açıklamaları Kapsamında
Kurumsal Sosyal
Sorumluluğun Karlılık
Üzerine Etkisi: BIST
Sürdürülebilirlik
Endeksinde Bir Araştırma”
Azzem ÖZKAN
Şükran GÜNGÖR TANÇ
Bahşende MUCUK
Implication of Tax Morale in Tax
Compliance Behavior- Albania’s
Case
Nertila CİKA
Fiona BALLA
Sotiraq DHAMO
Digital Auditors in Tax Auditing:
Towards to E-Audit by E-Daybook
“Kamu Denetiminde Dijital
Denetçiler: E-Defler ile E-
Denetime Doğru”
İlker CALAYOĞLU
16.00-16.30 COFFEE BREAK
vii
2nd DAY: OCTOBER 12, 2017
MAIN HALL HALL 1 HALL 2
16.30-18.30
XVI. SESSION XVII. SESSION XVIII. SESSION
Chairperson
Prof.Dr.Mehmet ÖZBİRECİKLİ
Chairperson
Prof.Dr.Hasan KAVAL
Chairperson
Prof.Dr.Azzem ÖZKAN
Corporate Social Responsibility and
Evidence in Annual Financial
Reporting in Albania
Ervis BEJKO
Remzi SULO
Albana JUPE
Auditing of Special Purpose Entities in
Terms of International Taxation and
Black Money
“Özel Amaçlı Kuruluşların
Uluslararası Vergilendirme ve
Kara Para Açısından Denetimi”
Çağrı Özgür KARABUDAK
Soner GÖKTEN
Analyzing International
Standard on Auditing
570 ‘Going Concern’ and
Related Auditor’s Reports
in Terms of Turkish Auditing
Standards
“Türkiye Denetim Standartları
Kapsamında Bağımsız
Denetim Standardı 570
“İşletmenin Sürekliliği” ve
İlgili Denetçi Raporlarının
Türkiye Denetim Standartları
Açısından İncelenmesi”
Seyhan Çil KOÇYİĞİT
Şükran GÜNGÖR TANÇ
Bilge Leyli ELİTAŞ
IPSAS vs National GAAP: Differences
and Challenge in Implementing IPSAS
in Albanian Public Sector
Dritan FİNO
Evaluation of Financial Information
Manipulation for the Borsa Istanbul
Companies between 2010-2014
“Borsa İstanbul Şirketlerinde
2010-2014 Yılları Arasında Yapılan
Finansal Bilgi Manipülasyonlarının
Değerlendirilmesi”
Eda TEKİN - Nalan AKDOĞAN
Gender, Education, Tenure
and Audit Opinion: Auditor’s
Perspective
Serap KURT - Murat OCAK
Money Laundering and Accounting
Profession - Albania’s case
Sotiraq DHAMO - Igli TOLA
Analysis of Academic Studies in Big Four
Refereed Accounting Journals Published
in Turkey (2008-2017)
“Türkiye’de Yayınlanan Dört Büyük
Hakemli Dergide Muhasebe Alanında
Yayınlanmış Akademik Çalışmaların
Analizi (2008-2017)”
Müslime SÖZEN
Effect of Industry 4.0 on
Internal Audit
“Sanayi 4.0’ın İç
Denetime Etkisi”
Bilal Zafer BERİKOL
Reporting and Auditing of
Environmental Matters in the Scope
of Sustainability Report
Banu SULTANOĞLU - Yıldız ÖZERHAN
Independent Audit in Capital
Companies in the Context of
Turkish Commercial Code
“Türk Ticaret Kanunu
çerçevesinde Sermaye
Şirketlerinin Bağımsız
Denetimi”
Mehmet Ali AKSOY
Emine Ebru AKSOY
3rd DAY: OCTOBER 13, 2017
SOCIAL PROGRAM
1
International Auditing Standards for Publıc Sector and an Assessment about Turkish
Supreme Audit Institution’s (Turkish Court of Accounts (TCA) Auditing Procedures in
Comparison with the International Auditing Standards / Prof. Dr. Nalan
AKDOĞAN
Prof. Dr. Nalan AKDOĞAN
Abstract
Nowadays, the main goal of all Supreme Audit Institutions (SAIs) is to promote a better understanding
of their different roles and tasks in society among the public and the administration. Accountable,
efficient, effective and transparent public administration has a key role to play in the implementation
of the internationally agreed development goals. The international Organization of Supreme Audit
Institutions (INTOSAI) promotes the efficiency, accountability, effectiveness and transparency in
public administration and accounting. Also for the independency of Supreme Audit Institutions and
the core principles of independent audit were pointed out with several declarations as Lima
Declaration, Mexico Declaration, Millennium Declaration etc.
Public sector auditing, conducted by the Supreme Audit Institutions (SAIs), is an important factor in
making a difference to the lives of citizens. The auditing of government and public sector entities by
SAIs has a positive impact on trust in society because it focuses the minds of the users of public
resources on how efficiently they use those resources. An independent, effective and credible SAI is
therefore an essential component in a democratic system where accountability, transparency and
integrity are indispensable parts of a stable democracy. (1)
The aim of this paper is to explain the role of SAIs in auditing government accounts and operations
and in promoting sound financial management and overall accountability in their governments.
Furthermore, the principles of INTOSAI and international audit standards and guidelines for financial,
compliance, and performance audits, guidance for good governance which are issued by INTOSAI are
given in this study. Also in this paper the implementations of Turkish Court of Accounts (TCA))
auditing procedures are assessed in comparison wıth the international audıting standards and some
important information about audit function, audit scope, financial audit guidelines, government
auditıng standards of Turkish Court of Accounts (TCA) are explained.
Başkent University, Faculty of Commercial Sciences, [email protected]
2
In Turkey, Government Accounting is based on accrual-basis and cash basis of accounting together.
Government Accounting Standards (GASs)-(DMSs) are in full compliance with the International
Publıc Sector Accounting Standards (IPSAS). GAS(DMS)= IPSAS . The accrual IPSAS are based on
the International Financial Reporting Standards (IFRSs), issued by the International Accounting
Standards Board (IASB) where the requirements of those Standards are applicable to the public sector.
They also deal with public sector specific financial reporting issues that are not dealt with in IFRSs.
GASs are issued by Government Accounting Standards Board of Ministry of Finance in Turkey.
GASs were published on Offıcial gazette. Although GASs were published, they have not been applied
yet by all general management administrations. In 2017 accounting period it is expected to be used
and prepare the statement of financial position and statement of performance (income and expense
report) and cash flow statement of all ministries and other public sector entities.
Government auditing standards are issued by Turkısh Court of Accounts (TCA). They are adopted
INTOSAI audit standards. Turkish Court of Accounts (TCA), is a supreme audit institution conducting
audit on behalf of the Turkish Grand National Assembly (TGNA), TCA is a constitutional entity that
is equipped with the task and power of taking final decisions that are independent. TCA has been
successfully continuing its audit and judicial tasks for 150 years. The TCA has been established in
1862 and is a reputable member of the global SAI community. TCA has audit function and Judicial
function. The TCA carries out audit function -legality- regularity (financial and compliance) audits
and performance audits. Regularity audit or statutory audit, which is a financial audit of the financial
or budget reporting of the audited entities. Regularity audit is based on financial audits which consist
of an evaluation on the accuracy of public administrative bodies' financial reports and statements, and
whether or not those bodies' financial decisions and transactions and any programs and activities are
compliant with the law. The auditors also evaluate the auditees' financial management and internal
control systems.
Compliance audits; take the form of an examination whether auditees' revenue, expense, assets and
other accounts and transactions comply with the law and other legal arrangements. The auditor,
examines whether all revenue has been received and all expense incurred in a law full and regular
manner.
In performance audit, the auditors evaluate whether or not public resources have been used effectively,
efficiently and economically. They also assess auditees' activities against the goals and indicators
which the latter have set with regard to accountability. Performance audit, refers to an examination of
a program, function, operation or the management systems and procedures of a governmental or non-
3
profit entity to assess whether the entity is achieving economy, efficiency and effectiveness in the
employment of available resources.
In the implementation of its judicial function, the TCA decides whether or not the accounts and
transactions of the competent departments are in accordance with the legal arrangements. At the end of
the audit process, the auditors prepare an enquiry into any losses to the public purse. If the auditors are
still dissatisfied with the counter-arguments of the competent officials, they prepare a judicial report,
which will contain the auditees' arguments and the auditors' opinion
TCA issues three reports which are ‘’External audit general evaluatıon report = Annual Audit Reports
+Other Issues ‘’, ‘’General Evaluation Report on Activity= Public Institutions Activity Reports, Local
Authorities General Activity Reports, General Activity Reports’’ and ‘’Evaluation Report on Financial
Statistics (Financial Statistics Evaluation Report)’’. The audit scope of TCA consists of:
1.General management (consists of a-central government -general budgets, specıal budgets,
(universities and other specıal budgets) regulatory ınstıtutions; b-Social security institutions; c-Local
Authorities, d-Municipality Enterprises)
2.State owned public enterprises
3.Public Funds
4.Revolving Funds
Some figures about audit reports of TCA for the year of 2015 are summarized in this paper in order to
assess the findings of audit reports. In addition to external audıt general evaluatıon report, general
evaluation report on activity and evaluation report on financial Statistics (Financial Statistics
Evaluation Report), TCA prepared 620 audit reports about public entities
All ministries of government, and all public enterprises sector and all metropolitan municipalities were
audited 100% per cent in 2015. TCA used for auditing producers, TCA financıal audit guidelines
princıples (auditing standards) which was adopted international auditing standards.
TCA audited 201 central administrations consists of 45 general budgets administratıons,147 special
budgets administrations and 9 regulatory institutions ın 2015.The financial audit results of these
audited administrations are unmodified opinion 90 , an adverse opinion 110, a qualified opinion 1. In
other words, the auditors opinion 44.75 per cent unmodified opinion,54.73 per cent an adverse opinion
and 0.50 per cent a qualified opinion. Also 185 municipalities (consist of 30 Municipalite Enterprises,
51 province municipalites and 104 district (county) municipalites) and 51 Local Authorities were
audited by TCA in 2015.The auditors opinions for 51 municipalites and 17 local authorities are
4
unmodified (clean) opinion, for 127 municipalites and 34 local authoritıes are an qualified opinion,
adverse opinions for 6 municipalites and one municipality received disclaimer opinion. In other words,
27.16 per cent of audited reports are unmodified, 68.6 per cent qualified, 3.2 per cent adverse and
0.5 per cent disclaimer opinion for municipalities. 33 per cent unmodified opinion and 67 per cent
qualified opinion for local authorities.
As a conclusion, when we analyze the audit reports, we find that there are some deficiencies about
disclosures of fınancıal statements which required by law and accounting standards for general
government sector. This problem can be solved through the Financial Ministry’s action.
Keywords: International Auditing Standards, Public Sector, Auditing Procedures
5
Accountants and Auditors as Providers of Assurance and Related Services – A SWOT
Analyses / Prof.Dr. Ingrid SHULI - Dr. Linda GJIKA
Prof.Dr. Ingrid SHULI
Dr. Linda GJIKA
Abstract
The recent developments of the assurance and related services1 market offer great future opportunities
for accountants and auditors. The increasing demand for sustainability reporting, the development of
the information reporting models, the increasing number of the companies exempted from audit
requirement (in line with increased audit thresholds and the exemption of more small companies from
the mandatory audit), the requirements of several stock markets and the choice of many companies to
use these services as a competitive advantage in their business have increased the demand for these
services significantly.
The purpose of this research is to examine the actual capacities and abilities of the accounting and
auditing practitioners as providers of high quality assurance and related services thus meeting market
requirements. For some of the assurance services, there are several providers operating in the global
market such as lawyers, non-governmental organizations, IT specialists etc. In this perspective, we try
to find out if accountants and auditors have any advantages compared to their competitors in the
market.
The method we have used for our research is the SWOT analyses. This analysis has been used since
1960 in order to identify the internal and the external factors which impact or will impact the progress
of an organization or a specific strategy. In fact, the SWOT analysis is usually used as a strategic
planning tool that helps an organization identify its strengths and weaknesses, as well as any
opportunities and threats that may exist. We have used the SWOT analyses in order to analyze the
current and future profile of the accountants and auditors as providers of assurance and related
services, their opportunities and the challenges they face in the market. Finally, we try to identify the
most effective strategies to be followed by accountants and auditors in order to benefit from the
opportunities these assurance services may offer. Usually the information needed for a SWOT
analysis comes from internal and external sources, including financial resources, market surveys,
Faculty of Economy, University of Tirana, [email protected]
Faculty of Economy, University of Tirana, [email protected] 1 Assurance services other than audit of financial statements.
6
performance indicators and competitor performance statistics. The data for our research has been
collected from an extended literature review and analyses regarding global and national developments
of the accounting profession and assurance and related services.
One of the key findings of our research is that accountants and auditors have many advantages
compared to their competitors in the market such as a defined organizational structure, well
established standards and manuals they can rely on, responsibility (based on the Code of Ethics),
lifelong learning attitude, long experience in providing similar services such as auditing, being
familiarized with determining materiality etc.
Meanwhile accountants and auditors should take into account some “weaknesses” such as a perceived
lack of independence of auditors providing assurance services, specialized IT capabilities and of
unified standards.
There are also some practical issues that accountants and auditors should be aware of when they offer
assurance and related services such as the identification of the appropriate criteria, the providing of
the necessary evidence for non-financial or future information and also understating the specific needs
of the users of this information.
By means of the competitive market interaction, accounting and audit practitioners need to discover
and develop the most efficient and competitive combination of services they can provide as well as
the relevant safeguards and practices by adjusting the costs and benefits of each alternative.
The results of this research may be used by the professional organizations of the accountants and
auditors in Albania so they can identify the most effective strategies to follow in order to help their
members to benefit from the market opportunities and their advantages as the main providers. This
study may also serve as a first step to other empirical studies on the position of the Albanian
accountants and auditors in the global and national market, the factors that impact the probability of
providing such services etc.
We believe that as long as there is a market demand for assurance and related services, accounting
and auditing practitioners should adapt their services and approach in order to respond to the needs of
the evolving market with alternative assurance services and related services.
Keywords: Auditor, Assurance and Related Services, SWOT Analyses
7
Strategic Planning as a Tool for Accountability in Turkish Public Administration /
Ahmet TANER
Ahmet TANER
Abstract
The purpose of this study is to investigate and identify the role of strategic planning in ensuring public
accountability through the case of Turkey’s public administration. The primary focus of study is
strategic management in public sector as a part NPM movement and strategic planning as a component
of strategic management. The study will mainly deal with the need for strategic planning in ensuring
public accountability and transeprancy and its impacts on external audit in Turkish public
administration.
In accordance with reconstructing of public finance management and control system by Law No 5018,
the duties and audit scope of Turkish Court of Accounts (TCA) have been enhanced with Law No
6085, which prescribes the duty of TCA as complicace audit, financial audit, and performance
(information) audit. Performance audit intents to measure the activity results related to the objectives
and indicators determined by administrations. In other words, the purpose of perfromance audit is to
evaluate the performance information generated by public administrations and to asses the reliability
of performance information system through examining performance targets or indicators in Strategic
Plan, Performance Program, Accountability Report.
It seems that the performance audit plays a key role in ensuring good govervance in public sector. In
order to reveal the challenges in implementing of strategic planning through sample selected, with
stratified random sampling, from performance audits by Turkish Court of Accounts have been
examined.
The study consists of four titles:
- NPM and Increasing Significance of Performance Management in Public Sector
- New Public Management Reform in Turkish Public Administration
- The Impacts of Strategic Planning on Public Accountability and External Audit
PhD, Principal Auditor, Turkish Court of Accounts
8
- Challenges in Implementing of Strategic Planning in Turkish Public Finance Management
Since 1980s, the public management systems have been undergoing reform or restructure process as a
impact of wave of globalization on the state or government. The reform and reconstruction efforts in
public sector have aimed to design bureaucracy, namely the managemet apparatus of government,
along with the role and functions of the state. As a part of sweeping reforms felt in all the World, the
main purpose of reforms or reconstruction polices has been to reinvent the governmet let alone to
improve the governmental functions as to compete actors of market or resist to threats or risks incurred
by globalization. The traditional public administrations no longer live up to the expectations or the
needs of public. As a result of market- oriented policies, the primary functions of goverment has been
turned into economic growth, competion, efficinecy and economy. Unlike the traditional public
administration, which is built on inputs, hierarchy and rules, permanence and stability, equality, New
Public Administration is predicated on outcomes and outputs, performance management, strategic
planning, multi-level governance etc.
The uncertainty of the budgeting and planning process, combined with the simple fact that there are
not enough resources to meet legitimate needs of the population, makes trying to manage these
economies and societies very difficult for even the most capable administrator (Peters, 2001:373). The
need for using resources economically and efficiently makes it necessary for goverments to embrace
management models which are prevailed in private sector. One of implications of NPM for public
administration systems is that the governments are forced to adopt the contemporary models of
management such as performance management, strategic planning, performance-based budget in order
to compete or resist emerging developments in world the need for using efficiently resources, ensuring
accountability all the levels of public administration requires the public managers to adopt long-term
perspectives, focus on the outputs rather that inputs. Since 1990s, the main concern for public
administrations has been centered on performance management. “In public sector, the performance
management usually refers to engaging in strategic planning to establish a direction and major goals,
setting specific goals, perhaps targets at national levels in organization and than using performance
measurement to help focus on achieving them” (Poister, Pasha and Edwards, 2013:625).
As many developing countries, Turkish public administration suffered from economic crisis affecting
the governments in globe and inclined to adopt public policies inspired by NPM. The implications of
NPM for Turkish public administration can be stated as downsizing of the state, privatization, the
decentralization of public services, subsidiarity, deregaulation, performance management. In the early
2000s, the main factors necesssitate the change in the realm of government have been diagnosed as
strategic gap, budget gap, performance gap, confidence gap (The Republic of Turkey Prime Ministry,
2003). In order to adreess these challenges, The Fundamental Law on Public Administration, which
9
prescribes comprehensive and profound administrative reforms, was prepared by government. Despite
approved by parliament, due to objections of former the president, the draft law was not put into
practice. Instead, Law No 5018 on The Public Finance Management and Control was enacted, in 2003
and put into practice in 2006, on the purpose of regulating structure and functioning of the public
financial management, preparation and implementation of the public budgets, accounting and
reporting of all financial transactions, and financial control in line with the politics and objectives
covered in the development plans and programs, in order to ensure accountability, transparency and
the effective, economic and efficient collection and utilization of public resources.
In addition to Law No 5018, other legal regulations have been enacted to regulate central and local
administrative structure in accordance with new public management’s basic tenets. Some of them are
Metropolitan Municipality Law, 2004; Special Provincial Administration Law, 2005; Municipality
Law, 2005; Law on Unions of Local Authorities, 2005; Law on the Establishment of Districts within
the Boundaries of Metropolitan Municipalities and on the Amendment of Certain Laws, 2008; Law on
the Allocation of Shares to Special Provincial Administrations and Municipalities from the General
Budget Tax Revenues, 2008; Law no. 6360, 2012. Law no 6085, 2010.
According to article 9 of Law No 5018, the public adminisitartions should prepare strategic plan which
covers medium and long-term objectives, core values and policies, goals and priorities, and
performance indicators of public administrations as well as the methods followed to achieve those and
resource allocation. Strategic plans define the current and desired position of organisations as well as
the way to close the gap between the two Law No 5018 has brought profound change in the budget
system along with other fields of public finance system. In accordance with Law no 5018, public
administrations are required to prepare their programme/project-based resource allocation and budgets
on the basis of their strategic plans, objectives and performance indicators. (Çatak and Çilingir,
2010:3) One of remarkable changes introduced by Law No 5018 has been establishing ties between
strategic plan and budget by means of performance program and accountability report in public sector.
The transformation of public administration into public management resulted in change in the
mechanisms of public accountability and control. New trends in public accountability not only
strengthened external audit but also placed importance on internal control mechanisms. As a result of
market-oriented trend in question, the top managers have been held responsible for defining their
strategic goals for five years period in line with higher-level policy documents, furthermore preparing
performance program, which involves performance targets on a yearly basis. In Law No 5018, it is
stipulated that public entities shall prepare accountability report which aims to provide information
about resources used for targets in performance programme and the reasons for any deviation
regarding the budget targets and realisations. The new public accountability model requires the public
10
to be involved actively in strategic planing process and results of implementation. In this respect,
external audit reports by Supreme Audit Institutions seem to play crucial role in ensuring public
accountability over strategic planning process.
With Law no 6085, Turkish Court of Accounts has assumed a new task with evaluating the
performance of strategic planning. For measuring the activity results related to the objectives and
indicators determined by the administrations, TCA has been conducting performance (information)
audit since 2014. In the framework of this audit methodology, for each public institution, strategic plan
is examined whether the public institution has complied with the regulations and whether appropriate
objectives and targets have been formulated. As to annual performance programme, it is examined
whether appropriate targets have been formulated consistent with the strategic plan. Finally,
Accountability Report is scrutinized whether performance is adequately reported on the objectives
stated in the annual performance programme including explanation of deviations in performance;
(TCA, 2014).
To evaluate effectiveness the performance of strategic planning in Public Finance Management
System, 12 performace audit reports prepared by TCA, as a sample, have been selected with stratified
random sampling. Depending on budget type, public administrations have been divided into three
groups: General budget institutions, special budget institutions and local governments. Three audits
from each group have been selected. The findings of performance audits reveal, despite legally in
effect for over ten years in public sector that strategic planning process has some deficiencies, and
does not perform effectively, due to corporate and structural problems, insufficient awareness of
strategic management, defects in internal control systems and poor control mechanisms in public
sector.
Keywords: Strategic Planning, Accountability, Auditing
References
Çatak, S. and C. Çilingir. 2010. “Performance Budgeting in Turkey”, OECD Journal on Budgeting,
Volume 3.
Dinçer, Ö. And C. Yılmaz. 2003. The Republic of Turkey Prime Ministry, Change in Public
Administration for Managing Change, Ankara.
Peters, B. G. 2001. The Politics of Bureaucracy, Fifth Edition, Routledge, London and Newyork.
Poister, T. H., O. Q. Pasha, L. H. Edwards. 2013. “Does Performance Management Lead to Better
Outcomes?” Public Administration Review, Vol. 73, Issue. 4, pp. 625–636.
Turkish Court of Accounts (TCA). 2014. Performance Audit Manual.
11
Case Study: Performance Audit on Ecosystem Preservation of Prespa National Park /
Dr. Aulent GURI
Dr. Aulent GURI
Abstract
There are over 100 definitions of sustainable development, but the most known and classic is that of
World Commission on Environment and Development (WCED) "Our Common Future", otherwise
known as the Brundtland Report1. According to this definition, "Sustainable development is a
development that meets the needs of the present without compromising the ability of future
generations to meet their own needs”. Today's reality shows a dominance of the economy on the
environment and society. Sustainable development recognizes the need for balance between economic,
social and environmental aspects. Therefore, sustainability is not the same as environment
friendliness, but a more complex concept. Sustainable development requires an effort from all sectors2.
The concept of sustainable development is likely to pose new methodological and analytical
challenges for SAIs. A key decision for study design in the future will be how far SAIs could, or
should, look at trade-offs between economic, environmental and social objectives3.
Aim
The main goal of the PNP audit despite of identifying and evaluating the factors that affect the
ecosystem of this entire area is to make recommendations for improving the current social, economic
and environmental situation.
Problem Statement
Prespa National Park has an area of about 27,750 ha of which about 5238 ha are water surface (Macro
Prespa Lake and Micro Prespa Lake). Unlawful cutting of firewood, uncontrolled fishing and hunting,
non urban waste management and urban pressure are the main issues raised in this paper. The
pollution of the Prespa Lakes waters by the non-treatment of sewage that ends directly into lakes or
Supreme Auditit Institution of Albania, Department of Performance, Phd on Economy and Sustainable
Development, [email protected] 1 World Commission on Environment and Development (WCED). 1987 Our common future.
2 National Audit Office of Estonia & University of Tartu, 2016, Introduction to Environmental Auditing in the
Public Sector 3 ISSAI 5130
12
undergroundwater, and the communication of Micro Prespa with the contaminated channel supplied
by Devolli River is another major problem. Water-related issues are among the most worrying
challenges many governments face, with implications for human health, economic development and
environmental protection. They range from rainwater drainage to drinking water infrastructure issues
and are often closely linked to agriculture4. All these problems have been reviewed not only from the
environmental aspect but also on social and economic aspects, as these three areas are linked and
directly affect one another.
Methodology
In this audit, three main approaches were used to analyze the information collected by the subjects: 1)
Quantitative approach, 2) Quality approach, and 3) Pragmatic approach, which is the most appropriate
approach to performance audits. The audit in its entirety has a statistical, observer, research, analysis
and comparative character. On the other hand, the SWOT analysis used in this audit aims to identify
the key internal and external factors that are important to achieve a certain objective. In addition, a
cost-benefit analysis is used to evaluate and compare the existing waste management option with the
proposed alternative from the audit team.
Content of the Paper
All of the above-mentioned problems which have negative impacts on the PNP ecosystem will be
widely treated on this paper by presenting the current situation and possible recommendations for
improvement. Each issue will separately dealt to better understand the responsibilities and obligations
of the subjects to which the recommendations are addressed. Where it is feasible and sufficient data
are provided, economic analysis will be carried out to calculate economic, social and environmental
damage from non-action and/or non-compliance of legal standards or criteria.
Keywords: Sustainable Development, Cost Benefit Analyses, Environment, Ecosystem
4 National Audit Office of Estonia & University of Tartu, 2016, Auditing Environmental Impacts of
Infrastructure Development.
13
The Financial Audit Between Professional Liberalism and Regulations / Prof. Dr.
Alexandru TRIFU - Prof. Dr. Moise CINDEA
Prof. Dr. Alexandru TRIFU
Prof. Dr. Moise CINDEA
Abstract
This paper has as main aim is to highlight the importance of this activity (profession), considered an
independent examination, in the economic and social life. This term comes from the Latin word
“audicere”, with the meaning of “to hear”. The beginnings of this profession were conspicuous in
verbal presentation during the act of audit.
The conduct of financial audits is subject to national legislation on one hand and to international
regulations and standards on the other (Dănescu, 2007; Kiss, C. et al., 2016).
In this respect, we may say that statutory audits (for those carrying out in accordance with statutory
provisions) became mandatory for companies since 1900 and the whole scope of the audit was and
still is to detect fraud, technical errors, errors of principle (Harris, 2016). But, the practice shows that
it is almost impossible for the auditors to detect all aspects of fraud and fiscal evasion, even they
exercise, in the conditions of the law, with skills and care their duty, to achieve the purpose of the
activity.
Therefore, we can speak about the liberalism and personalism in the fulfillment of audit activity, but
within regulations framework.
The methodology used in this analyze consists in a survey regarding what is and the purpose of audit
and empirism, based on numerous auditors’ activities and experiences (especially from The Iasi
Chamber of Auditors).
The paper is structured as follows: 1. General approach of the issue, principles and auditing process; 2.
Ethical aspects regarding the profession of auditor; 3. Financial Statements and their scopes; 4.
University “Petre Andrei” of Iasi
University “Petre Andrei” of Iasi
14
Possible challenges for auditors; Conclusions. Some remarks on the special aspects of this issue are
presented below:
Ethical principles represent the most important part, element, of an auditor’s activity. De aceste
principii, precum independence, integrity, objectivity, competence, confidentiality, technical standards
(according to IFAC “Code of Ethics for Professional Accounts”) depend the efficiency, clarity and
benefits for both parts implied in audit activity.
A professional auditor (accountant or economic studies on background) should not engage in any
business, occupation or activity that impairs or might impair his or her integrity, objectivity or even
the good reputation of the profession and, as a result, would be incompatible with professional tasks.
The Audit Report is concluded after the entire process is finished, audit which can take weeks or
months, this depending on the size and complexity of the company examined. The Report must
contain the auditors’ findings about the financial statements and other situations in accordance with
accounting principles. The final part includes the auditors’ opinion of the statements, comprising three
types of qualificatives: most favorable, qualifed (not all materials were in order) and the worst (the
situations have not been drawn up according to the regulations and the real situation of the company).
Data mining is considered a last minute challenge for auditors, because the revolutionaries IT & C
instruments come to support auditors’ activities, due to the large amount of information to be analyzed
and processed. We are dealing, in this case, with the auditing techniques assisted by computer. But, for
the moment, the cost of implement this method is too high, although it is very important to ease work
and increase the art and abilities of auditors.
Conclusion
The financial audit consists of communicating an opinion on the financial statements examined,
concerning the degree of compliance with the national accounting standards, the international
standards or other predetermined level.
The financial audit is organic linked to the auditors and to those who make important decisions
(CEOs, managers, etc.) within a company, firm, organization. The most important aspect we want to
highlight is that of the work, professionalism, skills of the auditors, translated into reliable, objective
and unaltered financial information (Reports), the decision makers/people interested, most need.
Especially when we are talking about a merger, the partners are very much relying on rigurous
statements by auditors.
15
Keywords: Financial Audit, Skills of Auditors
References
Dănescu, T. 2007. Proceduri și Tehnici de Audit Financiar (Financial Audit Procedures and
Techniques), IRECSON Publishers, Bucharest.
Harris, E. 2016. The Nature, Purpose, and Scope of an Audit and Review, www.toughnickel.com,
Accessed March 27, 2017.
Kiss, C., Fülop, M.T., Cordoș, G.S. 2015. “Relevant Aspects Regarding the Changes of the Statutory
Audit Report in the Light of International Regulations”, Audit Financiar (Financial Audit),
no.126-6, pp 15-25.
16
A Review on Audit Quality / Elsa TANUSHI
Elsa TANUSHI
Abstract
Studies on how to define and measure audit quality and the factors that affect it have been widely
conducted. However, there is still no universal agreement regarding a definition of audit quality.
The most used definition of audit quality is DeAngelo’s (1981) which expresses it, as the ability on
discovering the material misstatement and reports them. So, it has implicit the necessary competence
and professional behavior along the auditing process, as well as auditor’s independence and objectivity
to assure that the outcome (audit report) reflects the adequate opinion.
Despite the unclear definition, importance of the audit quality and its influence on market confidence
has been highlighted by regulators, investors and corporate governance. It must be stated that audit
quality is becoming more attractive among other related auditing subjects, due to its considerable
impacts on the reliability of the financial statements. Moreover, enhancing the confidence of the
financial statement users, can be considered as the result of higher audit quality.
Audit firms routinely determine the accuracy of financial records, but these audit firms must also
guarantee their own accuracy. Consequently, quality control measures are necessary. Many factors can
influence quality control at an audit firm, and it is important to consider these factors when evaluating
the potential quality of an audit.
According to the consultation paper of the International Auditing and Assurance Standards Board
(IAASB), audit quality is the significant issue that requires more considerable attention.
Understanding how audit quality is important requires investigating audit quality factors more
precisely. The IAASB’s Framework promotes the key elements of audit quality which are
distinguished as follows: a) Inputs covering such factors as values, ethics, and attitudes which are
influenced by the culture of a firm; also it covers knowledge, skills, and experience of auditors as well
PhD student in Accounting Department, Faculty of Economy, University of Tirana, [email protected]
17
as allocated time to complete the audit. These apply at both the engagement and firm levels as well as
at national level; b) Process covering audit processes and quality control procedures and their effect on
audit quality; c) Outputs including reports and information that are formally prepared for the purposes
of audit; d) Key interactions within the Financial Reporting Supply Chain covering formal and
informal communication between stakeholders and the context which may influence those
interactions; and e) Contextual Factors including a number of environmental factors that might affect
audit quality.
Audit quality may be affected by several factors which can be simply divided into the auditor
specifications and auditing process attributes. The European Directive 2006/43/EC, introduced a major
novelty on audit quality, already present at an international level: the quality control over the work
carried out by auditors. The Directive went beyond the concept of independence by introducing
forecasts regarding control of quality by defining the quality standards that the subjects entrusted must
necessarily comply.
In this Paper, we aimed to provide the reader with the principal concepts and recent findings regarding
the audit quality criteria. The study intends to examine the various aspects of audit quality starting
from a point of view strictly theoretical, focused on the overall framing of Audit Quality, then
analyzing the related audit principles and the guidelines to be followed during an assignment.
We intend to address the most important topics on quality control in the statutory auditing of accounts,
such as provided by the various National and International Standards on Auditing (ISA 220, 230, 240,
ISQC 1). We also aim to review and summarize the different audit quality factors, comparing the
results achieved by the related recent studies. In this regard, audit quality factors such as size, industry
expertise, auditor tenure, audit fees, non-audit services and auditor reputation, auditor specifications,
were found to be able to affect audit quality significantly. Moreover, such factors can affect each other
while affecting the audit quality directly.
Keywords: Audit Quality, Control Quality, Influencing Factors
18
Ethics Education and Vocational Training Process of Accounting and Auditing
Professions in Turkey: A Historical Perspective / Prof. Dr. Mehmet ÖZBİRECİKLİ -
Assoc. Prof. Dr. Dr. İlker Kıymetli ŞEN
Prof. Dr. Mehmet ÖZBİRECİKLİ
Assoc. Prof. Dr. Dr. İlker Kıymetli ŞEN
Abstract
Introduction
Ethics is important in the society in many aspects such as accounting, auditing, marketing, health care,
scientific studies, industry, and throughout our everyday relations. Consequently, we need ethics in
our everyday life to live with principles adding values to our life. However there are many ethical
problems in the society we live. The unethical behaviors being encountered in the society and business
world consist of corruption, fraud, misstatement, misappropriation etc. Also there are many
regulations and laws to prevent people from behaving unethical. In this context, we should answer
following questions. Is it possible that only regulations and laws can prevent people from committing
a corruption?
A research study conducted in Turkey (Özbirecikli, 2009) shows that the Code of Ethics in Turkey is
not adequate to enhance the intellectual capacity of accounting professionals covering auditors to act
ethically because of lack of ethics education in real sense and ethical perception. On the other hand,
unethical norms1 in accounting profession developed by collaboration between clients and accounting
professionals in Turkey such as “Good accountant refers to one who can accommodate all of the
demands of clients even if these demands are not in conformity with laws, ethics principles and
regulations”, a lack of a sense of public duty, and economic reasons are the significant factors having
prevented accounting professionals from true valuating in making decisions during their everyday
professional activities.
Consequently it is seen that ethics-related regulations should be supported with education activities.
Thus ethics education in real sense may provide contribution in decreasing unethical behaviors.
However it is not easy to teach ethics in real sense. Kranacher (2004) states three key elements of
ethics:
Mustafa Kemal University, Hatay-Turkey
Istanbul Ticaret University Istanbul –Turkey 1 Norm: Collective expectations that members of social units have; regarding the behavior of each other; rules
that guide behavior; rules defining situations and expected behaviors.
19
It involves questions requiring reflective choice (decision-making)
It involves standards of right and wrong (moral principles)
It is concerned with values (the “greatest good”)
Many people say “you can’t teach ethics.” But what they mean is “you can’t teach values.” That is
why we can suggest it is not easy to teach ethics in real sense. Actually there are ethics-related
courses throughout education process, but they are only courses. In many students’ minds, a course
may mean a barrier which should be passed in order to be successful in their academic life. They need
to pass it to be successful. If a student see ethics-related course like this, how can a teacher teach true
decision making, moral principles and values in real sense?
Aim of the Study
The present study aims to investigate main lines of vocational training and ethics education in Turkey
from past to today in order to reveal the elements effecting the efficacy of ethics education process by
using an education and training model employed in the 13th and 16th centuries in Anatolia: Akhism.
To do this, the study firstly explains social and economic rules of Akhism which were employed
successfully in the vocational training process and trade activities in between 13th and 16th centuries
in Anatolia. Then the current ethics education and vocational training process in today’s Turkey is
investigated. Accordingly the study suggests an ethics education process and compares it to the current
ethics education and vocational training process in today’s Turkey. In this sense, the study emphasizes
crucial points and shortcomings in current ethics education and discusses why ideal vocational training
and ethics education in accounting and auditing professions could not be reached.
Methodology
From the methodological point of view, bibliography method is used. The secondary sources were
used in this study mostly. The findings obtained were written in chronological order. The study is
organized as follows. Firstly, explanations on the birth and development of the Akhism, and the
relevant information such as social and economic rules and vocational training process are given.
Second, the modern vocational training and ethics education in accounting profession throughout
education process from primary school to accounting-related training period are investigated in order
to discuss relevant shortcomings in the said process. Final section evaluates the differences between
the suggested ideal education process and the education process in today’s Turkey in order to reveal
where we are and what to do.
General Evaluation and Conclusion
20
It is seen that the socioeconomic rules of Akhism system established an ethics infrastructure for the
business life in Anatolia 800 years ago. In other words, the system provided a solid and universal
structure being inclusive of ethics education and vocational training with working environment by
gaining values. In this context, we can claim that the system, among other features, was an applied
ethics education in real sense.
Indeed, thanks to the applied rules, the system struggled to;
-prevent employees from behaving unethical in trade activities
-provide value-based working environment with the artisan class
-form a working environment which had low tolerance level against unethical behaviors
-enable artisans to work without ambition and competition to gain more than others
-provide daily inspections to define if artisans obey the Rules
Namely, we can suggest that there was code of ethics all traders, craftsmen, journeymen, apprentices,
and henchmen were required to obey in business life of that time. This means that even if the names,
visage, and functions of the institutions and scale of the enterprises have changed in time, ethical
principles that should be obeyed in business life are still the same substantially.
However conditions of competition and economy in modern business life are very different from the
conditions existing in the Akhism period, that is, 800 years ago. Indeed, Anatolian entrepreneurs were
mostly artisans who had a socioeconomic structure that was only for supplying needs locally in a tight
area. As a result of the statist structure of the Ottoman Empire, big enterprises were founded by the
government. This caused private enterprises to remain small and prevented them from having a
competitive environment and having capital accumulation. In this sense, we can claim that the control
functions included quality control, price control, and restriction on opening new enterprises facilitated
people to obey the socioeconomic rules. We can consider the statist structure of the Ottoman Empire
as a motive here to obey these rules. In other words, if you sell all products you produce in a non-
competitive environment at fixed price, you may not have aggressive targets and you are highly likely
to obey the rules. So we can admit that unethical behaviors are the most likely to be encountered
where aggressive profit targets and competitive environment exist.
In spite of ever-increasing competition conditions and aggressive targets in today’s business life, it is
likely to teach ethics in real sense. To do this, we can develop a suggestion by considering above
mentioned elements weakening efficacy of ethics education process beginning from primary school
level. Table 1 illustrates how we are carrying out ethics education in today’s Turkey and how we
should carry out ethics education in real sense.
21
As shown in the Table 1, given the suggested ethics education process and working conditions, it is
seen that ethics education practices and working conditions have crucial shortcomings. In order to
comply with IES-4, in addition to adding ethics-related courses to the education programs,
professional accountants should hold and practice ethical values. In other words, candidates (trainees)
should be trained with professional accountants who are good role models and having values. Because
a role model not having ethical values is highly likely to make the all theoretical education worthless.
Table 1. Elements of ethics education in real sense vs. ethics education in real life
Gen
erat
ing
of
Eth
ics
Infr
astr
uct
ure
Ethics education process in real sense Ethics education process in real life
(aged 7-19)
True decision making, moral principles and
values should be taught to primary and
secondary pupils and high school students
(aged 7-19)
Only religion-based courses are given to
primary and secondary pupils and one moral
and philosophy-related course is given to high
school students
(aged 19-24)- University education
The curriculums should include more than one
ethics-related course. These courses should be
taught through case studies regarding company
scandals and the contents of them should be in
accordance with the IES-4.
Consequences of the unethical behaviors in the
cases should be discussed in terms of true
decision making, moral principles and values.
(aged 19-24)- University education
The curriculums of 50% of the business
schools in Turkey include only one ethics-
related course.
The said courses include basic concepts and
give almost completely theoretical knowledge.
Can we teach true decision making like
this?
Three-year-vocational training period
Ethics-related courses in vocational training
programs.
Professional accountants with whom candidates
do their traineeship should be good role models.
Three-year-vocational training period
Only vocational knowledge, not ethics-related
concepts as indicated in IES-4
Is the amount of good role models
sufficient?
Str
eng
then
ing o
f E
thic
s
Infr
astr
uct
ure
Supportive factors in business environment Supportive factors in business environment
Beginners need to follow role models throughout
education, vocational training process and in
business environment
Do sufficient amount of role models exist in
any stage of the whole process?
Tolerance level in workplace should be very low Is tolerance level in workplace low?
A trade culture in which people avoid aggressive
profit targets is needed
Is it possible to avoid aggressive profit targets
in an aggressive competitive environment like
this?
Norms should prevent individual aggressive Is it possible to prevent individual ambitions
22
ambitions causing desire to gain more than others
at any cost
to gain more than others in a competitive
environment like this?
Activities of professionals should be regularly
audited to determine if they act in accordance
with ethics code. The TCC can serve for this
purpose if most companies are audited properly.
The TCC requires audit of activities of
professional accountants and board of
directors
On the other hand, tolerance level in workplace should be very low. Otherwise it is not possible to
strengthen ethics infrastructure, even if ethics education process is implemented successfully and in
real sense. Robin and Reidenbach (1987: 51) stated that when individuals’ opportunities of unethical
behaviour in workplace increase, their tendency of taking advantage of these opportunities also
increases. Codes of ethics of any profession are not competent alone to decrease unethical behaviours.
These codes are necessary, but these codes must be adopted by professionals who have difficulty in
evaluating actions. Kaikati and Label, in their examination of US bribery legislation, concluded that
“no code of ethical behavior is likely to be observed unless the chief executive officer declares that
violators will be punished. When a company fails to take strict disciplinary action, many employees
assume that their unethical acts are accepted standards of corporate behavior.” (Chonko and Hunt,
1985: 342).
As well as above mentioned supportive elements, the Turkish Commerce Code No.6102 (TCC) passed
late 2011 should be considered as a supportive element in preventing unethical behaviors in business
life. Indeed it was prepared with a modern and reformist approach and can be considered as a change
that can direct the course of commercial life in Turkey. The TCC offers a very important opportunity
and foundation for institutionalization, increasing competitive power, establishing public confidence
and transparency. The ethical and transparent structures this change is likely to bring can be sustained
in Turkish commercial life. Accordingly, in a workplace, which has public confidence, transparency
and trade culture enabling its employees avoid aggressive profit targets is likely to be established. On
the other hand, norms based on ethics values can prevent individual aggressive ambitions causing
desire to gain more than others at any cost. Additionally, due to the TCC, that the activities of board of
directors and the chief executive officer are regularly audited enables to be determined if they act in
accordance with ethics code and spend shareholders’ money properly.
Keywords: Ethics, Vocational Training, Auditing Profession
23
International Cooperation for Accountancy Qualifications in Albania / Brisejda
RAMAJ(ZENUNI)
Brisejda RAMAJ(ZENUNI)
Abstract
The main subjects for this paper are international recognition of the qualifications of accountants and
auditors, recognition of audit rights and international cooperation to promote capacity building and
recognition.
Recognition between countries of qualifications of accountants and auditors is an important building
block for international cooperation. For cooperation an understanding of competences of accountants and
auditors and of responsibilities for their qualifications is necessary. Competences are the cornerstones for
recognition agreements between countries. Attention is also given to the position and influence of
international qualifications and institutions that extend beyond the boundaries of the home country and to
the facilities for foreign candidates.
Specific attention is given to the roles of governments, government agencies, regulators, professional
accountancy organizations, and if applicable universities in the recognition of qualifications.
Consideration will also be given to approaches to regulation and recognition that are applicable to groups
of countries, for example in regions. Finally attention is given to the important subject of audit quality
and harmonization.In a global economy capacity building is not only necessary for developing countries,
but it is as important for developed countries that need to regularly update their own capabilities and must
build on partnerships with other countries based on compliance with international standards and codes.
Specific attention is given to the roles of governments, government agencies, regulators, professional
accountancy organizations, and if applicable universities in the recognition of qualifications. A distinction
is made in approaches to recognition: mutual recognition compared with international recognition and
international presence, recognition of qualifications compared with practice rights for cross-border
mobility. Increasingly audit quality is a major factor in cross border and international cooperation. The
PhD Candidate at the Department of Accounting, Faculty of Economy, University of Tirana; e-mail:
24
next subject is comparability of audit qualifications in view of the requirements of International Standards
on Auditing (ISA) 600. Finally recent initiatives to promote capacity building for accountancy education
are considered, in particular for professional accountants in business and specialization. Competences are
the cornerstones for recognition agreements between countries.Attention is also given to the position and
influence of international qualifications and institutions that extend beyond the boundaries of the home
country and to the facilities for foreign candidates.A recognition framework can be used for comparison
between countries that already have, or want to establish Mutual Recognition Agreement (MRA). The
main parameters in the recognition framework are13
:
certification requirements (professional accountancy education, practical experience, final
assessment of professional capabilities, and continuing professional development, CPD);
providers of professional education (professional accountancy organizations, universities and/or
education institutes, government bodies);
responsibility for education requirements (government or government agencies, government with
professional accountancy organizations, professional accountancy organizations, and/or
universities); and,
licensing requirements for auditors (academic study, practical experience, licensing examination,
final qualifying examination).
It is of interest to consider how some major players approach the recognition of qualifications and
whether their conclusions are based on applicable international standards for professional qualifications of
accountants and auditors. In the analysis three standard setters are considered and three professional
conglomerates and one global organization.
The standard setters are the International Federation of Accountants (IFAC), the International Accounting
Education Standards Board (IAESB), the European Union (EU) and the International Auditing and
Assurance Standards Board (IAASB).Regulation of the accountancy profession - including education and
training - is a popular topic, worldwide, since the crises in the first decade of the 21st century.Many
initiatives in this field, international and national, on a political level, but also on an institutional level:
IFAC, Public Company Accounting Oversight Board (PCAOB), European Commission (EC), GAA, CCI,
Federation of European Accountants (FEE) and more. Because of globalization is notice extra-territorial
effects of these initiatives.
31 GAE 2012 Dynamics of Global Accountancy Education Prof Dr G.H. Karreman Prof Dr J.G. Kuijl, RA Prof
I.F.Y. Marrian, MA, CA A.M. Verweij, LL.M. page 85.
25
The framework is divided in General Characteristics, Accountancy Education and Competency Pillars.
Regional regulation and agreements are considered as part of General Characteristics. The content of
Accountancy Education is based on the IES. For comparison between qualifications the last part of the
framework is essential in which four Competency Pillars that are based on the IES are distinguished:
Pillar 1, Personal Development: university entrance level and academic study;
professional skills and general education; professional values, ethics and attitudes
Pillar 2, Professional Accountancy Education: accounting, finance and related
knowledge; organizational and business knowledge; information technology
Pillar 3, Professional Development: practical experience requirements; assessment of
professional capabilities and competence; continuing professional development
Pillar 4, Competence for Audit Professionals
In Albania, Institute of Authorized Chartered Auditors Albania (IEKA) became a member of the
International Federation of Accountants (IFAC) in May 2000. IEKA is also a member of the Federation
Internationale des Experts-Comptables Francophone (FIDEF) and the South East European Partnership
on Accountanc 2003. Review existing education programs for candidates and make necessary
improvements in accordance with the requirements of the Audit Law, the regulations on professional
training, IES 2, Content of Professional Accountancy Education Program and IES 4, Professional Values,
Ethics and Attitudes (Completed, September 2010 further, update, ongoing). In cooperation with
Albanian universities – IEKA Council will continue to make proposals for reviewing the accounting
professional education curricula, especially the part of education that is provided by the Universities (June
2014 ongoingthis has to be harmonized with other changes). Establishing a system of recognition
(accreditation) between IEKA and Universities. IESs requirements to be promoted to various Universities
in the country. (Completion date January 2017). Update CPD programs of IEKA`s members in
accordance with the Audit Law requirements, relevant regulations, as well as the requirements of IES 8,
Competence Requirements for Audit Professionals.Action Plans are developed by IFAC members and
associates to address policy matters identified through their responses to the IFAC. Compliance Self-
Assessment Questionnaire. They form part of a continuous process within the IFAC Member Body
Compliance Program to support the ongoing development and improvement of the accountancy
profession around the world.
Keywords: Accounting Education, International Cooperation, Recognition, Qualifications
26
Empirical Analysis of Auditor and Audit Firm Rotation Practices in BIST 100 / Assist.
Prof. Dr. Burcu GÜROL - Tayfun TÜYSÜZOĞLU
Assist. Prof. Dr. Burcu GÜROL
Tayfun TÜYSÜZOĞLU
Abstract
Rotation practices in auditing have been initiated to eliminate the risk of an audit failure which results
from long-term relationship of auditor and audit firm with the audit client. While some argue that there
are negative aspects of rotation practices, the rotation practices in audit are mandatory in many countries.
This study aims to answer questions regarding mandatory rotation practices of engagement partners and
audit firms in the listed companies, specifically BİST 100 companies, in Turkey.
Introduction
Financial statement users expect the financial statements fairly present the economic position of the
company. When there are likely to be some changes in the financial statements by taking into account the
personal interests of the preparers of the financial statements, the concept of independent auditing has
arisen as the need for an independent party to give opinion whether the financial statements presented
fairly. The number of financial statement users today is very high, and independent auditors play an
important role in meeting the above mention need through auditing financial statements prepared by the
significantly big companies.
The threat that due to a long or close relationship with a client or employer, an auditor will be too
sympathetic to their interests or too accepting of their work is called “familiarity threat”.
In order to eliminate this threat, rotation practices in auditing have been started. In the EU, directive
2006/43 required for the rotation of the engagement partner, while the change made in 2014 added the
requirement of audit firm rotation (Doğan, 2016).
The rotation practices in auditing in Turkey were regulated by the Capital Markets Board (CMB) and the
Banking Regulation and Supervision Agency (BRSA) before 2012. The Turkish Commercial Code (TTK)
Başkent Üniversitesi, Ticari Bilimler Fakültesi, Bankacılık ve Finans Bölümü, [email protected]
Public Oversight, Accounting and Auditing Standards Authority, [email protected]
27
numbered 6102 on 1 July 2012 entered in force and as a result, the establishment of the Public Oversight
Accounting and Auditing Standards Institution (POA), except for the special regulations of the CMB and
the BRSA for their jurisdictions, uniformity in auditing practices has been established (Şavlı, 2016).
The aim of this study is to analyze the rotation practices of the companies in the BIST100 category and to
reach the results of the average engagement partner and audit firm rotation periods before and after
mandatory rotation, the effect of mandatory rotation on these periods and the resulting effect on the
market share of audit firms. This study will show the effect of mandatory rotation in the engagement
partner and audit firm changes.
Literature Review
There are many studies on rotation practices. In these studies, it is discussed that the positive results of the
application of the rotation in the independent audit are achieved along with the negative results. Monroe
and Hossain have reached the conclusion that the mandatory rotation has negative effects on the
prolongation of the audit period for firms that are financially troubled in their study of Australian firms
(Monroe & Hossain, 2013). Lennox et al. (Lennox, Wu, and Zhang 2014) have disclosed that the length
of the audit period has a negative effect on the professional skepticism of auditor. According to
Nicolaescu, mandatory rotation has a positive effect on the quality of evidence in the audit, although the
cost-enhancing effect of the rotation (Nicolăescu, 2014). Supporting Nicolaescu's view, Kwon has
examined the impact of rotation practices in South Korea on audit quality, audit durations and costs, and
has found that rotation practices increase audit period, cost and audit quality. Bowlin et al. (Bowlin,
Hobson, and Piercey, 2015) have analyzed the subject from the psychology perspective and have found
that as the auditor’s association with the company increases, the auditor establishes a belief and that this
reduces the professional skepticism, which is a professional requirement. A number of studies have
shown that rotation practices are beneficial, but there are conclusions that the requirement of rotation
lowers quality of financial statements (Litt et al., 2014).
Method
In Turkey, rotation of auditors and audit firms started with the "Communiqué on the Independent
Auditing Standards in Capital Markets" published by the CMB in 2006. CMB determined the rotation
period to be 7 years in the related communiqué. Since the Communiqué was published in 2006 and the
rotation period was determined to be 7 years, data on the audit firms and the auditors of BIST100
companies between 1999 and 2015 were prepared based on audit reports. With the study on the data, it is
28
analyzed whether the auditor and audit firm changes before and after mandatory rotation supports the
major audit companies or small audit firms.
Conclusion
As the study continues, the results of the research will be shared in detail in the full text of the paper.
Keywords: Independent Auditing, Rotation in Statutory Audit, BIST100
References
Bowlin, K. O., J. L. Hobson, and M. D. Piercey. 2015. “The Effects of Auditor Rotation, Professional
Skepticism, and Interactions with Managers on Audit Quality.” Accounting Review 90(4): 1363–93.
Lennox, C. S., X. Wu, and T. Zhang. 2014. “Does Mandatory Rotation of Audit Partners Improve Audit
Quality?” Accounting Review 89(5): 1775–1803.
Litt, B., D. S. Sharma, T. Simpson, and P. N. Tanyi. 2014. “Audit Partner Rotation and Financial
Reporting Quality.” Auditing 33(3): 59–86.
Monroe, G., and S. Hossain. 2013. “Does Audit Quality Improve After The Implemention Of Mandatory
Audit Partner Rotation?” Accounting and Management Information Systems 12(2): 263–79.
Nicolaescu, E. 2014. “The Effects of Audit Firm Rotation on Earnings Quality.” Economics, Management
& Financial Markets 9(1): 148–53.
http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=95505245&site=ehost-live.
29
A Research on the Students in Ankara, Gazi, Hacettepe Universities for Effect of the Audit
Course on the Ethical Dilemma, Decision-Making and Financial Literacy / Res. Ass. Bahan
YENİLMEZ - Ceyhan ECEVİT
Res. Ass. Bahan YENİLMEZ
Ceyhan ECEVİT
Abstract
The development of audit in Turkey has progressed parallel to economic developments. The purpose of
this study is to examine the effect of the audit course on the ethical dilemma, ethical decision-making and
financial literacy, measure the level of awareness of students about these topics and examined the effect
of financial literacy on the ethical dilemma, ethical decision-making for the senior undergraduate student
which studying in the business administration department of the Ankara University, Gazi University and
Hacettepe University, which are the essential universities of Ankara. Historical financial crises show that
the training given to members of the profession is inadequate and remain only in a theory. Despite the
many steps taken in terms of professional members, there is still deficiencies for ethical dilemmas and
ethical decision-making, this situation is another proof that audit education is inadequate. The quality of
audit education given in this regard is very important for ethical dilemma and ethical decision-making. It
is also believed that the level of financial literacy is also important in making ethical decisions or
experiencing ethical dilemmas. The place of moral, ethics, ethical dilemma, ethical decision making and
financial literacy in accounting and audit education is indisputable. It is thought that the purpose of the
audit education is to be able to cope with the ethical problems that are likely to be encountered in the
profession besides the given other topics described.
According to past studies that good auditors are insufficient in ethical decision-making and ethical
dilemmas, and considering that ethical decision-making and ethical dilemmas are not mentioned much in
the theoretical and practical applications of auditing courses; in this study with taking the opinions of
senior students, who take an audit course, about whether these topics are included in the audit course,
their level of awareness of the ethical dilemma and ethical decision making is going to be investigated.
Furthermore, after considering whether the auditing course has an effect on the level of financial literacy,
Ankara University, Faculty of Political Science, Department of Business Administration
30
we will investigate whether financial literacy has an effect on ethical dilemmas and ethical decision-
making, considering that financial literacy facilitates ethical dilemma and ethical decision-making.
In the first part of this study, the literature about the research subjects will be examined. In the second
part, the field research will be explained in detail and in the last part of the study, the data obtained from
the applied questionnaire will be analyzed and the results and suggestions about the research will be
presented.
Keywords: Audit, Ethical Dilemma, Financial Literacy
31
The Issues to be Taken into Consideration in Independent Audit of Profit and Loss
Statement and Other Comprehensive Income Statements for the Public Interest Entities
and the Others / Assoc. Prof. Dr. Dr. Deniz Umut DOĞAN (ERHAN)
Assoc. Prof. Dr. Dr. Deniz Umut DOĞAN (ERHAN)
Abstract
The audit of financial reports is a practice of independently controlled companies with the idea of
verifying the financial reports compliance to the pre-defined criteria. The pre-defined criteria are the
reporting framework which has to followed in generation the financial reports. According to the Law,
both Public Interest Entities (PIE), either alone or with their affiliate companies and subsidiaries, and
also other companies (non-Public Interest Entities, NPIE) will be subject to independent audit at the
following year, whenever they satisfied the at least two of the below three conditions for two
consequent reporting periods.
- Total Assets equal and greater than 40 million Turkish Liras
- Net Annual Sales equal and greater than 80 million Turkish Liras
- Number of Employees equal and greater than 200
The financial reporting compliance frameworks for independently controlled companies are:
- For Public Interest Entities: TAS-TFRS (Accounting Standards of Turkey Financial Reporting
Standards of Turkey)
- For Non-Public Interest Entities: SME FRS (Financial Reporting Standards for Small and
Mid-Size Companies)
For Public Interest Entities, i.e. companies were obliged to the CMB- Capital Markets Board or BRDA
- Banking Regulation and Supervision Agency legislations, the financial reporting framework is TAS-
TFRS. According to 2016 statistics of KGK- Public Oversight, Accounting and Auditing Standards
Authority, companies 6250 in number were undersigned an independent audit contract whereas 1550
of them with PIE status were applied TAS-TFRS in their reporting disclosures.
After the date of January 1st of 2018, the companies that obliged to independent audit thus far not
applied the TMS-TFRS will be obliged to comply the SME FRS (Financial Reporting Standards for
Small and Mid-Size Companies) henceforth. As an incumbent framework for such companies, SME-
Başkent University, Faculty of Commercial Sciences
32
FRS focuses on the true, material, comparable over form and view of financial disclosures for the
information needs of all users of SME financial statements. Pursuant to new Turkish Commercial
Code (Law No: 6102) Article 88 and Temporary Article 1, the related companies are left compulsory
to apply and to comply with TAS accounting principles and accompanying interpretations published
by the TASB whist issuing commercial books, separate and consolidated year-end financial
statements. The cited articles of Law also gave privilege to TASB in releasing special-purpose
standards and regulations as per the realism of the different company sizes and sectors.
Considering the European Union and other developed countries’ practices, it is seen that
implementation of IAS standards are limited exclusively for the companies whose shares were
registered under capital markets, and when likened with IAS, low-cost and more practical financial
reporting frameworks were designed for companies that were not provisioned under the stock
exchange systems. Due to mentioned rationale, TASB has discerned between the implementation and
audit scopes, in parallel to the international practice, and limited the implementation scope with the
public interest companies. Together with that decision, the non- public interest companies were
promulgated at Official Gazette dated July 29, 2017. SME-FRS will supersede General Communique
on Accounting System Application and Supplemental Clauses, for companies that are subject to
independent audit but solely not applying TFRS.
Within this context for such companies, SME-FRS will be the compulsory financial reporting
framework in their financial statements to be presented at the General Assembly. In addition to these
concerns, SME-FRS will constitute an internationally acknowledged landmark in independent audit
efforts of non- public interest companies while contributing to the overall credibility of the national
economy. Accordingly, the basic financial disclosure set for TAS-TFRS applying companies will be;
1. Statement of Financial Position
2. Cost-Profit Statement and other Detailed Income Statements,
3. Statement of changes in Equity,
4. Cash Flow Statement,
5. Notes covering critical accounting policies and other explanatory information
Whereas, the basic financial disclosure set for SME-FRS applying companies will be;
1. Statement of Financial Position
2. Cost-Profit Statement
3. Statement of changes in Equity,
4. Cash Flow Statement,
5. Notes covering critical accounting policies and other explanatory information
33
The companies will apply its compulsory financial reporting framework requirements while preparing
its statements, likewise the independent auditors will consider the compliance issues in accordance
with relevant framework. Based on that perspective, this study will emphasize and discuss the key
aspects should implicitly be considered in the control of cost-profit statement and other detailed
income statements of companies that were obliged to independent audit.
Keywords: Independent Audit, Profit and Loss Statement, Other Comprehensıve Income Statement
34
The Effect of the Independent Audit Report on the Value of Public Offered Banks'
Share: The Case of Turkey / Assoc. Prof. Dr. Dr. Adalet HAZAR - Assoc. Prof. Dr. Dr.
Şenol BABUŞCU - Dr. M. Oğuz KÖKSAL
Assoc. Prof. Dr. Dr. Adalet HAZAR
Assoc. Prof. Dr. Dr. Şenol BABUŞCU
Dr. M. Oğuz KÖKSAL
Abstract
Independent auditing has great importance both for the companies and the parties in relation with the
companies. Audit reports provide important data sources in terms of reviewing future strategies as
well as providing information about the company's past activities in standard formats.
Investors who are investing their savings in the capital markets consider various data sources during
the decision stage. One of the activities conducted by public offered companies within the framework
of transparency and public disclosure basic principles is independent auditing. Historical and current
information about companies as well as future expectations are effective in the purchase decision of
the shares of public offered companies.
Regarding public offered companies, there are various studies about the relation between the disclosed
information to the public and the share price. Güvercin (2015) analyzed the earnings disclosures and
company value relationships on 78 BIST 100 companies in the timeframe covering the period 2009-
2013 in his study. In the study, the short-term effects of earnings disclosures on company value were
analyzed by event analysis method. Contrary to expectations, after the disclosure of earnings the
company value has been declined as a result. Another finding at the same time is that negative
earnings surprises are more important for the investor.
In the study conducted by Güzeldere (2014), institutional transparency index was established
following S&P transparency and public disclosure methodology on the basis of public disclosures and
transparency applications of companies traded stocks in BIST30. Tobin's Q ratio, market value / book
value ratio, price gain ratio, price cash flow rate, price selling ratio were investigated as the company
Başkent University, Faculty of Commercial Sciences, Department of Banking and Finance,
[email protected] Başkent University, Faculty of Commercial Sciences, Department of Banking and Finance,
35
value representatives, the supernormal return of stocks was investigated as the financial performance
indicator and the existence of the relationship between asset profitability and equity profitability was
investigated as the activity performance indicators with the obtained index scores. In this study which
used panel data analysis, statistically significant relationships were found between the transparency
index and the market value, book value, the return on assets and the return on equity.
In the study conducted by Kaya and Öztürk (2015), the relationship between companys' accounting
profits and stock prices was examined. For this purpose, the relationship between the accounting
profits and stock prices of companys in the BIST Food, Drink and Tobacco Sector in 2000-2013 was
analyzed using panel cointegration and Granger causality test.
As a result of the analysis,
-it is determined that accounting profits and stock prices are cointegrated
- one way causality was determined from the variables of the net profit margins and the return on
assets representing the accounting profits to the share price variable
- two-way causality was determined between the main operating profitability variable and the share
price variable.
The study conducted by Güzeldere and Tekbaş (2015) was done with the aim of screening studies that
examine the relationship between corporate governance practices and firm value and firm performance
and determining the possible causes of the relationship. In this context, corporate governance practices
are defined as disclosure of financial information as well as information about the company's basic
objectives, management structures, policies and practices that are not covered by trade secrets and that
will not hinder the company's competitiveness. In studies conducted in our country and abroad, it is
observed that there are studies that support the findings in the theory as well as studies that are found
to be out of theory. As a reason for these differences, it is concluded that the econometric models and
transparency indices used in the study and the study period are also important.
In the study conducted by Taliyev (2011), it was aimed to measure the level of public disclosure of
Russian companies traded on the Russian Stock Exchange and to reveal the relationship between the
level of public disclosure and company values and some company variables. The relationship between
the company public disclosure indexes and company values and other company variables was
examined by multiple linear regression analysis. As a result of the analysis made for year 2009, a
correlation was observed between the companies' public disclosure indexes and the Price, Market
Value, Market Value / Book Value and Total Assets as company variables. For the year 2008, only the
36
relationship between the Market Value, Market Value / Book Value variables and the public
disclosure indexes was determined. No significant correlation was found for other variables.
In this study, it is aimed to examine whether there is an interaction between the publication periods of
the independent audit reports of the banks included in the BIST 100 and the price of the stock. Until
today, no special analysis has been found only for the banking sector. Another difference of this study
from other studies is only to analyze of the effect of the information in the independent audit report on
the decisions of the investor of the banking sector shares.
In this framework, the effect of information disclosures about financial structures of public offered
banks on the price volatility of bank shares was investigated by analyzing the average price of stocks
for the 5 working days before the publication date of the independent audit reports and also the price
movements on the day of the announcement of the audit report and the following 4 working days of
the public offered banks. In this context, it was tried to get an idea about the behavior of investors
investing in banking sector shares by performing cointegration analysis in the dataset.
Keywords: Independent Auditing, Audit Reports
References
Altan, M. and F. Arkan. 2011. "Relationship Between Firm Value And Financial Structure: A Study
On firms in ISE Industrial Index" , Journal of Business and Economics Research, Vol. 9, 61-65.
Düzer, M. 2008. "Finansal Analizde Kullanılan Oranlar ve Firma Değeri İlişkisi, İMKB’de Bir
Uygulama" , SBE, Sakarya, Master Thesis.
Güvercin, A., Y. Demir. 2015. “Kazanç Açıklamaları ve Şirket Değeri İlişkisi: BIST100 Şirketleri
Üzerine Bir Olay Analizi”, Eskişehir Osmangazi Üniversitesi İİBF Dergisi, Aralık 2015, 10(3),
233-253.
Güzeldere, H. 2014. Kurumsal Şeffaflık, Firma Değeri ve Firma Performansları İlişkisi: BİST
İncelemesi, İstanbul Üniversitesi Sosyal Bilimler Enstitüsü İşletme Anabilim Dalı Finans Bilim
Dalı, Doctoral Thesis.
Güzeldere, H., M. Ş. Tekbaş. 2015. “Halka Açık Şirketlerde Kurumsal Yönetim Ve Etkileri”, Journal
of Economics, Finance and Accounting – (JEFA), ISSN: 2148‐6697, Volume: 2 Issue: 1, ss:1-
17.
Pekkaya, M. 2006. "Kâr Payı Dağıtımının Şirket Değeri Üzerine Etkisi: İMKB 30 Endeks Hisselerine
bir Analiz" , ZKÜ Sosyal Bilimler Dergisi, Cilt 2, Sayı 4. Zonguldak, 183-209.
Jansen, G. 2004. "Public Information Arrival and Volatility Persistence in Financial Markets", The
European Journal of Finance, Volume. 10, 177-197.
37
Kaya, A., M. Öztürk. 2015. “Muhasebe Kârları İle Hisse Senedi Fiyatları Arasındaki İlişki: BİST
Firmaları Üzerine Bir Uygulama”, Muhasebe ve Finansman Dergisi, Temmuz, ss:37-54.
Louhichi, W. 2008. "Adjustment of StockPricestoEarningsAnnouncements: EvidenceFromEuronext
Paris" , Review of Accounting and Finance, Vol. 7, Iss. 1, 102-115.
Mitchell, M. L. And J. H. Mulherin. 1994. "The Impact of Public Information on Stock Market",
Journal of Finance 49, Issue. 3, 923-950.
Özaltın, O. 2006. "Sermaye Yapısı ve Firma Değeri İlişkisi: İMKB'de Bir Uygulaması, Süleyman
Demirel Üniversitesi", SBE, Master Thesis.
Taliyev, R. 2011. Kamuyu Aydınlatma ve Firma Değeri; Rusya Menkul Kıymetler Borsasında Bir
Uygulama, Ankara Üniversitesi Sosyal Bilimler Enstitüsü İşletme Anabilim Dalı İşletme,
Doctoral Thesis.
Yücel, E. 2012. "Firma Çeşitlendirmesinin Firma Değeri, Riski ve Performansına Etkileri: Türkiye
Uygulaması", Doktora Tezi, Çukurova Üniversitesi, SBE, Adana.
38
Internal Audit Quality in 5S Environment / Orgeta HARRUNAJ
Orgeta HARRUNAJ
Abstract
5S is amongst the first and fundamental steps implemented by an enterprise towards the path of
implementing Total Quality Management and continuous improvement at the operation level. 5S is a
process designed to organize the workplace, keep it clean, maintain effective and standard conditions.
It instils the discipline required to enable each individual to achieve and maintain a world-class
environment.
Quality Environment (5S) Practice is a concept which has been widely adopted by organizations as
one way to achieve Total Quality Management (TQM) and business excellence. 5S refers to 5
principles to maintain quality which emanate from Japanese word: Seiri (sorting), Seiton
(straightening), Seiso (shining), Seiketsu (standardize) and Shitsuke (sustain). 5s concept aims to
create a conducive, clean and tidy workplace which in turn can improve work quality and
performance. Internal audit of 5S Quality (IAQ) has been introduced to ensure the organization can
assess its strength and areas for improvement.
This study attempt to measure the organizational factors that influence the effectiveness of internal
audit of 5S Quality such as number of resources, auditor competencies and audit report, as well as
looking at how these factors give impact towards company operational performance. The
questionnaire were administered to head of audit and internal auditor in Albanian private companies.
My hypotheses on the impact of organizational factors (resources adequacy, staff competency and
report quality) to the effectiveness of internal audit of 5S quality are all positive. In addition, the
results also show significant perception by internal auditors that an effective internal audit of 5S
quality can help influencing company operational performance.
Introduction of Quality Environment Practices
Quality Environment (5S) is one of the TQM principles that brings a healthy, comfortable and
productive life for everyone at work (Ho and S.K, 2010; Ho et al., 1995). This is fundamental to
productivity improvement of Quality Management System (QMS) and consistent with the spirit of
TQM and BE. When implemented successfully in a company, 5S will bring about amazing changes.
Quality Environment practices use 5S.
Faculty of Economics, Tirana University, [email protected]
39
Concept as tools towards achieving systematic organization, productive environment, and
standardization in the workplace. 5S is an acronym for five Japanese words that are Seiri, Seiton,
Seiso, Seiketsu and Shitsuke (Ho and S.K., 2010; Ho et al., 1995). By implementing first 3S (Seiri,
Seiton and Seiso) all unnecessary items are able to be removed from the workplace, only necessary
items are conveniently International Journal of Academic Research in Accounting, Finance and
Management Sciences located near users, machines and equipment are kept clean and shiny. The
driving force for 5S program comes from people. In this respect, Shitsuke is critical to its success.
Shitsuke is to train people accordingly so that they will follow good habit.
The general concept of the 5S is that they are intended to eliminate waste (Osada, 1993). Working in
disorder is neither productive, nor safe. 5S is a simple and practical method to instil a quality culture at
the work place. It is relatively easy to undertake, and requires minimal additional resources. The first
and small investment made in time and effort pays off in a much bigger manner when the results are
realized and maintained.
Among the main benefits of implementing 5S are:
the workplace becomes cleaner, safer, well-organized and more pleasant
floor space utilization is improved
workflow becomes smoother and more systematic and non-value added activities are reduced;
time for searching tools, materials and document is minimized;
machine breakdowns are reduced since clean and well-maintained equipment breaks down
less frequently and it also becomes easier to diagnose and repair before breakdowns occur,
therefore extending equipment life;
errors are minimized leading to making defect-free products;
consumables and material wastage are minimized;
the morale and satisfaction of employees improves; and
the productivity of the organization improves together with the quality of products and
services.
Here are some explanations about 5S.
i) Sort (Seiri). The first step requires employees to sort and systematically discard items that
are not needed in the workplace. Red tag strategy commonly employed in order to help
company eliminate unnecessary items. Sorting is an excellent technique to transform a
cluttered workplace layout into an effective area to improve efficiency and safety.
ii) Set in order (Seiton). Employee will organize and arrange necessary item in a neat and
systematic manner so that they can be easily retrieved for use and to return after use. The
40
second S reflects a very popular saying “a place for everything and everything in its
place”. It emphasises safety, efficiency and effective storage and consequently improves
the appearance of the workplace. The main benefit is the searching time will be reduced
and there is no human energy waste or excess inventory.
iii) Shine (Seiso). It refers to clean and inspects the workplace thoroughly so that there is no
dirt on the floor, machinery and equipment. This step emphasises on cleanliness in order
to ensure a more comfortable and safer workplace, as well as better visibility, which
reduces retrieval time and achieves higher quality work, product or services.
iv) Standardize (Seiketsu). Employee has to maintain a high standard of organization by
keeping everything clean and orderly at all times. It can be achieved by establishing
standard procedures in order to determine the best practices and at the same time ensuring
everyone carries out their individual activity in the workplace.
v) Sustain (Shitsuke). The last step is to train people to practise the 5S system continuously
so that it becomes habitual and ingrained in the culture of organization. Self-discipline is
required to maintain consistency of standards of quality, safety and cleanliness.
Keywords: 5S Practices, Internal Audit of 5S Quality, Organisation Performance
41
Analysis of Disclosures about Risk Management and Risk Measures within the Annual
Reports of Manufacturing Companies Listed on Borsa İstanbul 100 Index / Res. Asst.
Osman AYDIN - Assoc. Prof. Dr. Dr. Serap YANIK - Prof. Dr. Nalan AKDOĞAN
Res. Asst. Osman AYDIN
Assoc. Prof. Dr. Dr. Serap YANIK
Prof. Dr. Nalan AKDOĞAN
Abstract
Competition has become more intense due to globalization. Therefore, companies are obliged to give
more value relevant, reliable and comparative financial information to the stakeholders. In this context
‘the annual report’ is essentially referred to the financial and narrative report prepared by the
corporation for the 12 months ended. It comprises many parts and its content is mainly dictated by
legislation, accounting rules and stock exchange regulations.
When the causes of bankruptcies happened in early 2000’s in developed countries (e.g. the United
States, Great Britain, Italy) are examined, it is determined that the main reason is inadequate risk
management. The Sarbanes Oxley Act, enacted in 2002 after Enron's bankruptcy in the United States,
is an important regulatory regime in bringing responsibility for disclosure of risk management at the
board of directors level in businesses. Another regulation on risk management in the United States is
the COSO Internal Control Framework, launched in 1992 by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). COSO's Corporate Risk Management
Framework, published by COSO in 2004, covers internal control; as a structure that attaches more
importance to risk management. The European Commission has issued Directive 2006/43 / EC. In
summary, the Directive states that public interest entities should have an audit committee, at least one
of its members must be independent, and that they should have information about the regulation or
supervision of financial statements. According to paragraph 6 of Article 39 of the Directive, in the
duties of the audit committee, there is a surveillance of the effectiveness of the risk management
system.
Res. Asst. Osman AYDIN Baskent University Commercial Science Faculty, Department of Accounting and
Financial Management mail: [email protected]
Assoc. Prof. Dr. Serap YANIK Gazi University, Faculty of Economics and Administrative Sciences,
Department of Business Administration mail: [email protected]
Prof. Dr. Nalan AKDOĞAN Baskent University, Commercial Science Faculty, Department of Accounting
and Financial Management mail: [email protected]
42
Companies providing information in terms of transparency and accountability to their stakeholders,
predetermine the risks that they will encounter in the operating cycle and manage those risks for their
own benefits.
Risk is the probability of occurrence of unexpected events in general. Unexpected events are expressed
as uncertainty and the risk is to make the uncertainties measurable. For a company, risk is the
possibility of developments that may threaten the company's existence, development and continuity.
The success of an enterprise depends upon its capacity to anticipate, avoid, accept, mitigate and
exploit risks. Their survival strongly depends on their ability of managing corporate risks altogether.
Risk management contributes to the value creation process by helping companies actively deal with
key underlying events that will create uncertainty in the future and help them react in a manner that
will increase the likelihood of being positive and reduce the likelihood of adverse outcomes.
Enterprise risk management is, in essence, the latest name for an overall risk management approach to
business risks. According to the Casualty Actuarial Society (CAS), enterprise risk management is
defined as: "The process by which organizations in all industries assess, control, exploit, finance and
monitor risks from all sources for the purpose of increasing the organization's short and long term
value to its stakeholders."
The CAS then proceeds to enumerate the types of risk subject to enterprise risk management as
hazard, financial, operational and strategic. Hazard risks are those risks that have traditionally been
addressed by insurers, including fire, theft, windstorm, liability, business interruption, pollution, health
and pensions. Financial risks cover potential losses due to changes in financial markets, including
interest rates, foreign exchange rates, commodity prices, liquidity risks and credit risk. Operational
risks cover a wide variety of situations, including customer satisfaction, product development, product
failure, trademark protection, corporate leadership, information technology, management fraud and
information risk. Strategic risks include such factors as completion, customer preferences,
technological innovation and regulatory or political impediments. Although there can be disagreement
over which category would apply to a specific instance, the primary point is that enterprise risk
management considers all types of risk an organization faces.
With the Turkish Commercial Law numbered 6102, the concept of risk management is included in the
commercial code. The regulation on risk and risk management in the Turkish Commercial Law are
basically made in Article 378 of the Law. According to this article, "the board of directors is obliged to
establish and operate an expert committee, operate and develop the system for the purpose of early
detection of the risks, the implementation of the measures and remedies that threaten the company's
existence and development in the companies whose shares are traded in the stock exchange.”
43
There is an implicitly manageable risk description on this site. Risk is the existence of the causes that
can be managed in case the necessary precautions are taken to jeopardize the company's development.
This is the aim of the ruling, to warn board of management against risks and ensure that the necessary
decisions are taken in advance. In this context, it was obligatory to establish a system for the early
detection and management of the Turkish Commercial Code 6102.
The most important purpose of the establishment of this committee is the implementation of corporate
governance principles in companies whose stocks are traded in the stock market. This committee
differs from the audit committee in that the audit committee keeps the administration under
surveillance, but this committee focuses only on the risks. In addition, if the audit is a retrospective
review, the risk appraisal concerns future and future interpretations.
In this study, we examined 42 manufacturing companies’ annual reports traded on Borsa Istanbul
(BIST) 100 Index for the years 2015 and 2016. As 10 companies’ annual reports were not available,
they were excluded from the data. Therefore, the data set is comprised of 32 manufacturing companies
that make company risk identification and give statements about the precautions that they take against
the risks.
The risks and their definitions disclosed by the 32 manufacturing companies in 2015 and 2016 are
given in the Table 1 below. We observed that, the major defined company risks are under financial
risk ‘foreign exchange risk’ with 93,75 percent and ‘interest rate’ risk with 84,38 percent. With respect
to the measure of those highly mentioned risks, the companies mostly use derivative instruments to
hedge against them. 71,88 percent of the companies are defined operational risk and 18,75 percent
defined hazard risk.
In conclusion, the risk definitions in the annual reports are examined, there is no explanation for
amount effects of operational, strategic and hazard risks' other than financial risks. Also, we couldn’t
reach some definitions of risks such as reputation risk.
Two companies which explain risks detailed in their annual reports by using derivative instruments,
minimize their loss or make profit. In our study, we analyzed how they use derivative instruments.
44
Table 1. Types of Defined Risks and Definitions
Risk Companies
defined Risk % Definition of the risk
Financial 29 90,63%
Financial risks cover potential losses due to changes in financial
markets, including interest rates, foreign exchange rates,
commodity prices, liquidity risks and credit risk.
-Foreign exchange
rates 30 93,75%
The Company is exposed to the exchange rate risk arising from the
exchange rate changes due to translation of foreign currency
denominated debtor or creditor's sums into Turkish Lira. The exchange
rate risk is monitored by analyzing the foreign exchange position.
Assets and liabilities denominated in foreign currencies expose the
Group to foreign currency risk.
-Interest Rate 27 84,38% The company is exposed to interest rate risk because of the floating
rate loans it uses.
-Credit 25 78,13%
Credit risk is the risk of financial collapse of the other party, who is
unable to meet the obligation of one of the parties in relation to a
financial intermediary.
-Liquidity 24 75,00% Liquidity risk is the risk that a company can not meet its funding
needs.
-Cash Flow 23 71,88% Represents the maximum loss to occur in the targeted cash flow due to
market conditions at a specified time interval.
-Capital 22 68,75% Having a good capital structure and debt capacity to sustain its
activities in a healthy manner.
-Market 16 50,00% Market risk, which consists of exchange rate, cash flow and interest
rate risks
-Price 10 31,25%
Contrary to the existing view on raw material prices, negative changes
can have a potential to increase raw material costs and may have
negative effects on margins.
-Debt 7 21,88% Risk of non-payment of trade receivables
Operational 23 71,88%
Operational risks cover a wide variety of situations, including
customer satisfaction, product development, product failure,
trademark protection, corporate leadership, information
technology, management fraud and information risk.
-Adaptation 2 6,25% Compliance with legislation, environment, working environment
-Association 1 3,13% Risks that may arise from the Company's partnerships
-New investment 1 3,13% The risk of new investments to be made
-Cyber security 1 3,13% Possible cyber attacks
-External
environment 1 3,13% Environmental risks
45
Risk Companies
defined Risk % Definition of the risk
-Maturity 1 3,13% Maturity structure of debt and receivables
-Brand 1 3,13% Risks related to brand reputation
-Consumption 1 3,13%
Political and economic instability can cause consumer confidence to
worsen, depending on whether the sales are complete from developing
and leading markets.
-Product safety 1 3,13% The risks that products may experience during the life cycle, Products
must be regularly inspected for disposal before they are sold.
-Water 1 3,13% Use of natural resources
-Reputation 1 3,13% Risks that may arise in company reliability and brand value
-Purchasing 1 3,13%
A significant portion of the cost of goods sold consists of raw
materials and packaging materials, many of which are either sold or
priced at commodity prices. prices may fluctuate in the price and
supply of these inputs for various reasons.
-Strategic 13 40,63%
Strategic risks are structural risks that can prevent achievement
of targets set in short, medium or long term in the strategy which
is one of the most important elements in preparing for the future.
-Political
Environment 4 12,50% Political tension in active markets
-Legal 3 9,38% Legal risks, risk of compliance with existing legislation, regulations,
standards
-Customer 8 25,00% Determining the purchasing limits of the customers and controlling the
exceeding limits
Hazard 6 18,75%
Hazard risks are those risks that have traditionally been
addressed by insurers, including fire, theft, windstorm, liability,
business interruption, pollution, health and pensions.
Keywords: Annual Reports, Risk Management, Risk Disclosure
46
External Quality Assessment of Internal Audit in the Albanian Public Sector / Dr.
Kesjana HALILI - Dr. Dritan FINO - Prof. Dr. Vjollca KARAPICI
Dr. Kesjana HALILI
Dr. Dritan FINO
Prof. Dr. Vjollca KARAPICI
Abstract
Internal audit function worldwide has received increasing attention, as a management tool for
improving public sector performance. In both private and public organizations, internal audit has
become an indispensable management tool for achieving effectively the objectives.
The purpose of internal audit, according to the Institute of Internal Auditors (IIA) (2013), is to
evaluate and improve the effectiveness of an organization's risk management, control, and governance
processes. In order to have the most effective internal audit function that fulfills its goal, the full
support of the management, independence and high professional competency are essential and they
also ensure a qualitative audit activity. The approach, used in this paper to evaluate the effectiveness
of internal auditing in Albania is based on the methodology used by the Ministry of Finance, where
mainly four standards for internal auditing are measured: management support, independence,
professionalism and the performance of the audit activity.
The Institute of Internal Auditors (IIA, 1999) defines internal auditing as: “An independent, objective
assurance and consulting activity designed to add value and improve an organization's operations. It
helps an organization accomplish its objectives by bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of risk management, control, and governance processes. If we
refer to three lines of defense model presented by the Institute of Internal Auditors (2013), internal
audit is listed as the third line in this model, providing independent assurance to the top management
for the achievement of the entity’s objectives.
Internal auditors provide the governing body and senior management with comprehensive assurance
based on the highest level of independence and objectivity within the organization. The introduction of
General Director, Public Internal Financial Control Department, Ministry of Finance of Albania,
Director, Financial Management and Control Department, Ministry of Finance of Albania,
Professor, Faculty of Economics, University of Tirana, [email protected]
47
such a function increases management awareness of its responsibility as regards sound corporate
governance and ensure that management be provided with the evaluations and recommendations
necessary to be able to secure and improve the operations of the organization.
The history of public auditing in Albania goes back to the early 1900s. Elements of public audit or
better control as it was called at that time have existed since 1912. Those elements were later
developed through a number of acts, laws and by-laws. In the beginning of the 1990s, the functions of
internal control and revision were carried out by the High State and Control. There were control-
revision units, which were part of financial offices in every public entity, called the Department of
Finance and Control Revision, but they did not perform IA activities. In the beginning of 2000 the EU
started to support Albania in introducing the new concept and elements of PIFC. In each ministry
financial control units were established. In the Ministry of Finance a central institution, the General
Directorate of Financial Control, was created in order to harmonize financial control activities in the
public sector.
The Law on Internal Audit in the Public Sector in Albania of 13 of February 2003 laid down the
foundation for an internal audit function in the public sector. A decentralized approach has been
chosen although Albania is a small country with a small administration for the implementation of
internal audit.
The audit law was amended in 2007, 2010 and lately in 2015 a new law was approved. The law
no.114/2015 on “Internal Audit in the public sector in Albania” requires that all level of government
units, other units providing public services and every unit that is funded from the state budget it should
be subject to internal audit. Internal audit service it has to be performed in any of the forms provided
in this law and the other criteria set in the bylaws. Public units can establish their own internal audit
unit if they have more than three subordinate units. Also, internal audit service can be provided
through an agreement between heads of two public units or through contracting the service based on
the procurement law requirements. The table below provides detailed information on the number of
internal audit units established in the public entities in Albania in the last years:
Table 1: Some Data Concerning Internal Audit Units
Description 2012 2013 2014 2015 2016
Number of internal audit units 109 106 100 103 112
Percentage of auditors positions filled 96.3% 95% 93.9% 92% 93%
48
Source: Data gathered from the Ministry of Finance annual reports on internal audit activity
As it can be noticed from the table 1, the number of internal audit units has been increasing from 109
units in 2012 to 112 units in the year 2016. In the table below is presented some detailed data
regarding internal audit units in the public sector during 2012-2016. The analysis of the composition
of audit structures shows that 386 internal auditors out of 416 approved in the organogram’s are
currently employed, of whom 295 are certified auditors as "Internal Auditors in the Public Sector" and
58 auditors do not possess this certificate. Table no.2 gives detailed information on the distribution of
the number of auditors and their status concerning the certification as "Internal Auditors in the Public
Sector".
Table 2: Data on Internal Auditors for 2015
Internal Audit Units Structure
(number)
Internal
auditors
Plan/Realisation
Certified
In Process
Uncertified
Line Ministries 16 93/84 82 1 1
Central Institutions 20 86/80 69 4 7
Percentage of current auditors certified 82% 85% 82.9% 90% 76%
Percentage of auditors with>5 years
experience
60% 57.6% 58,4% 63% 55%
Percentage of auditors with<5 years
experience
40% 42% 41.6% 37% 45%
Realisation of audit missions absolute
number
2346/239
1
2098/2196 1642/1665 1609 /1515 1412/1361
Realisation of audit missions percentage 98% 96% 99% 94% 96%
Number of findings 4698 3556 4441 4186 9421
Findings per auditor/value (mln lek) 8.2 11.2 57.4 189.5 5.5
Level of recommendations 7650 6628 8469 7459 7629
Implementation of recommendations 3311 4015 3822 3835 3556
49
Universities and SOE 24 81/79 60 8 11
Independent Institutions 9 31/29 28 0 1
Local Institutions 43 125/114 56 20 38
Total 112 416/386 295 33 58
Source: Data gathered from the Ministry of Finance annual reports on internal audit activity
From these data we noticed a large number of non-certified internal auditors, which makes the
managers of the institutions accountable for appointing employees without experience in important
units such as internal audit, which is in contradiction to internal audit law. From the analysis of the
educational background of audit staff it is noted that the largest number of internal auditors comes
from economic backgrounds where 337 auditors have graduated as economists, 37 lawyers and only
12 belong to other technical specialties. Professional composition of auditors which consists in the fact
that most of them belong to the field of economics is associated with high levels of financial audits
performed.
The purpose of this paper is to provide an analysis of the effectiveness of internal audit within the
Albanian public sector. Based on the analysis of the new methodology developed by the Ministry of
Finance on the “External Quality Assessment of Internal Audit”, are drawn some conclusions on the
focus of this assessment. Findings of this paper indicate that strengthening internal audit function will
be a challenge in the country, as the benefits from this function are not yet well understood at the
management level.
This study focused on evaluating the effectiveness of internal audit units, introducing the level of the
four factors that affect the increase of efficiency, i.e. the support of management, independence,
professional development and quality of internal auditing.
In the government units in Albania, there is considerable scope for improvement to the practices and
procedures used by internal audit to deliver a professional service. In many units, there is a lack of
clarity as to the role of internal audit and of its relationship with management. In general, internal
control systems are not completely known to heads of public units, therefore they have an unclear
concept on the role of internal audit. Also, ensuring a better quality in the internal audit activity still
remains a sensitive issue although solutions are sought in every assessment of this activity in the
public sector. Functioning of internal audit unit in contradiction with the laws and by-laws remains an
issue. Moreover, risk assessment is a poorly developed process in auditing activity and important audit
50
techniques, such as risk assessment are not employed and the level of auditing internal control systems
is unknown.
Professional staff stability is an issue often with the internal audit of dependent units or local
government units. The absence of professionally qualified internal auditors has contributed to the
under development of internal audit operations. Moreover, the insufficient and inadequate level of
internal audit training provided in the past, means that internal audit staff do not, in many instances,
have the skills necessary to carry out audits to the standard required.
In conclusion, the function of internal audit in Albania, in order to promote good governance, to
improve the systems of internal control to ensure that taxpayers' money is used in an economic,
efficient and effective way, presents numerous challenges in terms of ensuring independence of the
auditors' professional growth and implementation of their activities in accordance with international
standards of internal audit.
In the future, the focus should be on raising management awareness on the usefulness of the audit
function, continuous professional growth as well as performing the audit in accordance with
international standards. Management, should not only establish an internal audit function, but also give
sufficient consideration to the conclusions and recommendations provided by it. Also, one of the
priority fields is raising the capacities and further professional development of internal auditors.
Engagement of professional staff is an important factor to ensure effective and successful management
of internal control systems established in public units.
Keywords: Internal Audit, Quality Assessment
51
Internal Auditing – An Effective Approach in Developing Sustainability Management
Systems / Prof.Dr. Suzana GUXHOLLI - Anisa VRENOZI
Prof.Dr. Suzana GUXHOLLI
Anisa VRENOZI
Abstract
Sustainability is a concept which expands on a larger perspective than the economic, environmental,
and social challenges faced by an organization on the daily and future operations. Sustainability refers
to the ethical dimension of these operations, affecting the stakeholders of the organization and the
planet on a larger scale. In this sense, more and more sustainable development is considered as an
essential part of corporate governance by the Board of Directors and other stakeholders of companies.
In nowadays business culture, the success of a company is not only measured in terms of monetary
profitability, but also in the sense of social awareness and consciousness. This way of doing business
is not only because the companies perceive it as the right thing to do, but also is advantageous for the
companies in several perspectives. In addition, investors, employees and customers are increasingly
becoming more demanding toward businesses in terms of socially responsible commitments. In this
perspective, progressively, companies are presenting separate reports on sustainability as part of their
annual reports to independently assure stakeholders and society regarding the sustainability of its
operations.
On another perspective, an increasing number of organizations are proactively adapting their internal
management systems to adjust for the new requirements and transform it in a competitive advantage.
These developments provide opportunities for internal auditing to contribute with its independent and
objective assurance services as an auditor as well as a consultant. This contribution can enhance best-
practices of internal auditing to a higher level of added value for the organization since the internal
auditor is a crucial channel in the establishment of trust and considerably contributes to corporate
social reporting and sustainability concerns. The main objective of the internal auditing role consists
on improving any process within the organization with the aim of enhancing revenue and reducing
risk. Additionally, as part of the core task of an internal auditor is considered the provision to the
management of well-restructured and updated information regarding the operational and compliance
University of New York Tirana
MSc, University of New York Tirana
52
issues and also intermittent the participation in the stakeholder dialogue process. During the job of
evaluating a specific department or process of the company, the internal auditor aims to improve that
process also under the perspective of corporate social responsibility and sustainability.
Furthermore, the increasing importance of these dimensions and the respective impact on risk
management results in further challenges concerning the control environment and, the establishment
of effective sustainability management systems, which will assure clarity, transparency, and trust. The
contribution of the internal auditor in this process is twofold: during the first phase, assist the
management in establishing a sustainability management system and after implementation, perform
system audits. On a broad perspective, the contribution of internal auditors would extend in reviewing
the sustainability strategy designed and implemented by the company; controlling the adequacy of the
employed systems in line with the objectives and targets of the strategy, assess the effectiveness of the
reporting line, implementation and operation within the sustainability management system and test the
reliability of quantified reports through the evaluation of performance indicators. Nevertheless, to
successfully accomplish this task, the internal auditor has to acquire knowledge regarding
sustainability practices and the relevant applicable audit techniques.
Nowadays, internal audit function is considered among the most significant factors in generating
sustainable value, which advances the value and performance of the organization. Consequently,
organizations have to consign adequate importance and acting power to internal auditing in creating a
sustainable audit system. In this perspective, the aim of this study is to examine the system of
sustainable internal audit which is the indispensable element for the development and well-
performance of sustainability management systems.
Keywords: Corporate Social Responsibility, Corporate Governance; Internal Auditing, Sustainable
Development, Sustainable Management Systems
53
Regularity Audit in Private Budgeted Organization in Turkey and an Application of
Turkish Standards Institution / Assist. Prof. Dr. Dr. Zeki YANIK - Prof.Dr. Beyhan
MARŞAP - Assoc.Prof.Dr. S. Serap YANIK
Assist. Prof. Dr. Dr. Zeki YANIK
Prof.Dr. Beyhan MARŞAP
Assoc.Prof.Dr. S. Serap YANIK
Abstract
It has become a requirement that financial statements of financial institutions of the state's institutions
be accountable, comparable and transparent. It contributes to the fulfillment of accountability of public
administrations, including the review and evaluation of financial records and the reporting of financial
reports and statements. The purpose of the public sector audit is; to provide citizens and the public
with assurance that the effective, economic and efficient use of public resources in accordance with
the purposes set out in the law has been achieved. This assurance is fulfilled by the Court of Accounts
(Supreme Audit Institutions) as it is all over the world.
In this study, the financial audit dimension of the regular audit conducted by the Turkish Standards
Institution within the scope of public audit of the SAI was examined and the differences from the
private sector audit were revealed. While analyzing TSE data in the study, qualitative research
approach was preferred and case study was applied.
Introduction
Public word finds two meanings. The primary meaning is given to the people living in a country. The
other meaning is the legal entity created to fulfill certain public services. These entities, which are also
referred to as public institutions, are established by the authority to carry out one or more public
services or activities with the enforcement of administrative, technical, social and economic factors,
and they function with the administrative principle by giving legal entity to the public service itself
(Giritli, Bilgen, Akgüner, 2001: 256; Duran, 1982: 188).
Public institutions can be categorized from various dimensions. The administrative subjects of the
institutions (administrative, economic, social, scientific, technical, cultural, regulatory and
Atılım University, Faculty of Economics and Administrative Sciences, [email protected]
Gazi University, Faculty of Economics and Administrative Sciences, [email protected]
Gazi University, Faculty of Economics and Administrative Sciences, [email protected]
54
supervisory) are classified in terms of law. While different forms of management (public
administration, private management) and field of activity (national, regional, local) are important,
different classifications can be made according to the budget they use.
Institutions by budget:
i. Public administrations within the general budget
ii. Special budget institutions
iii. Regulatory and supervisory agencies
iv. Social security institutions
vi. Local authorities
vi. Special budget institutions other than Law 5018.
Budgets of administrations under general government are central government budget, social security
institutions 'budgets and local administrations' budgets. The establishment of budget can be possible
under any other name for public administrations.
The central government budget consists of the budgets of the public administrations included in the
lists (I), (II) and (III) attached to the Public Financial Management and Control Law No. 5018.
A special budget shall be established for each public sector in accordance with the provisions of the
Law on the Establishment and Operation of the Ministry of the Interior, the budget of the
administration. Institutions subject to special budget include universities, General Directorate of
Foundations, Turkish Standards Institute, Turkish Academy of Sciences, TUBITAK, YÖK, BDDK.
The purpose of the public sector audit is; (INTOSAI) to ensure that public resources are enacted
lawfully, in an effective, economical and efficient manner in accordance with the purposes set out.
This assurance is fulfilled by the Court of Auditors which is an independent audit body. SAIs are
obliged to provide accurate and reliable information to the public as they are responsible for both the
institutions they control and the accountability of all their activities. When these obligations are
fulfilled, it is very important to establish a certain standardization at international level. In this context
INTOSAI sets and publishes the High Auditing Institutions Standards (ISSAI). INTOSAI provides an
institutionalized framework for the Supreme Audit Institutions (INTOSAI, p11) to encourage the
development and transfer of knowledge, to improve public sector supervision around the world, and to
increase the members' professional capacities, reputations and influence in their own countries.
55
Audit of the Turkish Court of Accounts in the Public Institutions
With Law No. 6085, which came into force in 2010, all activities using public resources were included
in the audit of the Court of Accounts and the dual structure in external auditing was terminated by
being included in the Supreme Auditing Board of the Prime Ministry Supreme Auditing Board, which
audits state economic enterprises. With this Law, the Court of Accounts has been repositioned in
accordance with today's conditions, international public accounting and auditing standards and
contemporary developments in management and supervision
(Https://www.sayistay.gov.tr/tr/?p=2&categoryıd=10).
With this law, the Court of Accounts has also undertaken the duty of reporting to an audit and judicial
body, which conducts external audits through the new public financial management and audit system.
Under this task, the responsibility for accountability in the framework of regularity and performance
audit, and the placing and dissemination of financial transparency, control the appropriateness of
transactions in the audit process, and consequently the rules that lead to public loss from
accountability and accountability of the responsible parties. On the other hand, it provides correct,
sufficient, timely information and reports to carry out the audit activity in accordance with generally
accepted international audit standards.
Research Methodology
The aim of this study is to determine the conformity of the external auditing process conducted by the
Turkish Court of Accounts with the Public Auditing Standards from the public institutions and
organizations operating in Turkey. The findings of the investigation period and the findings are
presented below.
Purpose and Scope of the Study
The aim of this study is to reflect on the implementation of the regularity audit, which is carried out
within the framework of the new public financial management and audit system, through an institution
supervised by the Court of Accounts.
Research Method and Technique
In this research, the audit of the Court of Accounts will be examined on the basis of the application
dimension of the International Public Auditing Standards in the process of carrying out the external
auditing of the public institutions and the effectiveness of the regularity audit will be tried to be
revealed. In this direction, qualitative research approach was preferred and case study was applied. In
the case study investigation, a small number of events are examined in depth in a number of aspects
within a certain period of time. The data are comprehensive and detailed. In a case study, the
56
researcher may investigate one or two case studies intensively or compare a limited number of case
studies by focusing on several factors (Neuman, 2007). In this study, Turkish Standards Institute,
which is a public institution subject to special budget, was selected within the scope of the case study
and audit of the Audit Office of the financial tables and internal control system was examined.
The data will be obtained from the financial statements and the audit report announced on the web
pages of the Turkish Standards Institute and the Turkish Court of Accounts. In addition, face-to-face
meetings with SAI auditors will be conducted to collect information on how they conduct regularity
audits within the audit process.
Keywords: Public Audit, Regularity Audit, TSE, Court of Accounts
57
Analysis of Transparency Reports of Independent Auditing Institutions in Turkey /
Prof. Dr. Zeynep TÜRK - Res. Asst. Erdem KÜRKLÜ
Prof. Dr. Zeynep TÜRK
Res. Asst. Erdem KÜRKLÜ
Abstract
The aim of this paper is to analyze whether the transparency reports prepared by independent audit
institutions operating in Turkey between 2013-2016 have been reported in accordance with Article 36
of the independent audit regulation. In this study, transparency reports of 82 independent audit
institutions were examined into the official website of the Public Oversight Accounting and Auditing
Standards Authority (POA).
The results of this study showed that: 31 of the 82 independent audit institutions have not been issued
transparency reports in the official website of the Public Oversight Accounting and Auditing
Standards Authority (POA) for the year of 2013-2016. The transparency reports of independent audit
institutions have contained some deficiencies and differences from Article 36 of the regulation on
independent audit. These deficiencies and differences which have been observed in transparency
reports are quality assurance reviews, continuing education policies, compliance with the principle of
independence and distribution of income.
Keywords: Transparency Reports, Independent Auditing, Public Oversight Accounting and Auditing
Standards Authority (POA)
Prof.Dr., Osmaniye Korkut Ata University, Faculty of Economics and Administrative Sciences, Economics,
[email protected] Res.Asst., Osmaniye Korkut Ata University, Faculty of Economics and Administrative Sciences, Economics,
58
Auditor Opinion in the Frame of Baumeister’s Ego Depletion Theory / Dr. Pınar OKAN
GÖKTEN
Dr. Pınar OKAN GÖKTEN
Abstract
In this study, ego depletion as one of the factors affecting auditor’s judgement is theoretically
discussed. Sigmund Freud who is the author of several influenced studies on brain mentions three
dimensions of personality: Id, ego and superego. Id is the most natural and primitive dimension of
personality and tend to act with its own wishes. On the contrary, superego acts to make behaviors fully
appropriate to ethics, general customs and traditions. Ego refers to an equilibrium point between id
and superego and it is the reason of realistic behaviors. Dominance of id or superego is not desired
situations. It is necessary for individuals to control their impulses originating from their id by
suppressing them in accordance with the rules of society. Freud uses the relation between a horse and
its rider as an example to explain the relationship between id and ego. In this example horse represents
id and rider represents ego. Although rider (ego) takes the control in hand, in some cases, horse (id) as
a driving force tends to go its own direction.
Willpower provides to redress the balance between id and superego. Willpower is the ability of people
to control their behavior in a conscious manner. It is a limited source and it may run short if it is
overconsumed. The notion of ego depletion, which has an important place in the field of psychology,
also emerged from this point of view.
Roy Baumeister is one of the leading researchers working on willpower and he developed the ego
depletion theory in the late 1990s. Ego depletion, also expressed as self-regulation failure in the
literature, investigates the effects of constraints on human behaviors. When individuals repress their
emotions by overusing their willpower, frailty occurs and they cannot control themselves as in
ordinary times.
Baumeister et. al. (1998) supplied an influential contribution to the literature in the field of
psychology. In this study, the concept of ego depletion is explained by the results of various
experiments. The most known and effective experiment is mentioned in detail below.
PhD, Gazi University, Faculty of Economics and Administrative Sciences, [email protected]
59
In this experiment, participants were asked to be hungry for the experimental environment. Chocolate
cookies cooked before attendees come and their smell spread throughout the room. There were
chocolate cookies on one side and radishes on the other side. It was said that while a group from
incoming participants could only eat from cookies, the other group could eat only from radishes. Later
on, a third group, not included in the tasting stage, was added. After all these, puzzles were given to
these three groups and asked to try to solve them by trying as many times as they want without any
time limit. But it was not said to participants that it was impossible to solve these puzzles. The time
the participants spent trying to solve the puzzle and the number of trials they did were recorded by the
observer. According to the result of this experiment, the group of participants allowed to eat chocolate
chip cookies and the group that did not participate in the tasting stage worked about equal time to
solve puzzles. The group of those who used their willpower in order to suppress the impulse (id) of
wanting to eat chocolate chip cookies, tried to solve puzzles shorter period of time than others. In
other words, participants who ate radishes while wanting to eat chocolate cookies dealt less with
puzzles as they consumed extra energy by using their willpower. In other words, there was ego
depletion.
Similar studies have been done related with this subject. Researchers first create a situation that
requires the use of willpower in order to control themselves such as do not eat from cookies, watch a
sad movie but do not react. After that, participants are being tested with factors such as solving puzzle,
playing games or others that require a brain effort. The common aim of all of these is to prove the
validity of ego depletion and that willpower is an exhausted resource as long as it is used.
Ego depletion may adversely affect auditors’ judicial and decision making capacities. The situation in
which the auditor does the job unintentionally is the most basic indication of ego depletion. Similarly,
while the auditor is about to complete his/her job, boss’s behavior of taking this job from the auditor
and giving a new job also creates ego depletion. Generally, when a person finishes a stage, he/she is
motivated to finish the whole in progressive tasks. There will be ego depletion as a result of an
interruption in the work task. Because this interruption will suppress the finishing impulse within the
person (Hurley, 2015). The main aim of the auditor is to collect and evaluate evidence that will
provide reasonable assurance for the opinion to be reached. Ego depletion may (1) prevent sufficient
and appropriate evidence accumulation of the auditor, (2) restrain the auditor’s suspicious behavior,
(3) prevent detailed examination, (4) lead to distraction. If the company that is subject to the audit is
also the customer of the auditor, there will be ego depletion as the auditor has to use willpower too
much. This situation may also negatively affect the manner of action expected from the auditor during
60
the judgement process. In this context, in order to increase the effectiveness of auditing audit firms
should take the problem of ‘ego depletion’ into consideration.
Keywords: Ego Depletion Theory, Behavioral Accounting, Auditor Judgement
References
Baumeister, R. F., E. Bratslavsky, M. Muraven, D. M. Tice. 1998. “Ego Depletion: Is the Active Self a
Limited Resource?”, Journal of Personality and Social Psychology, Vol. 74, No. 5, p: 1252-
1265.
Hurley, P. J. 2015. “Ego Depletion: Applications and Implications for Auditing Research”, Journal of
Accounting Literature, 35, p: 47-76.
61
The Effects of Internal Control System on Corporate Governance: Application in
Companies within the Scope of BIST Corporate Governance Index / Figen CANBAY
ÇİĞDEM - Prof. Dr. Recep GÜNEŞ - Assoc. Prof. Dr. Dr. Yusuf Cahit ÇUKACI
Figen CANBAY ÇİĞDEM
Prof. Dr. Recep GÜNEŞ
Assoc. Prof. Dr. Dr. Yusuf Cahit ÇUKACI
Abstract
Aim of the Study
With this study, that a good internal control system affects corporate governance positively and that
deficiencies in internal control system has negative effects on corporate governance applications are
tried to be proved.
Definition of the Problem
Internal control system does not have impact on corporate governance.
Method of the Study
In this study, in order to determine the effects of internal control system on corporate governance, a
survey which is oriented to chairman of executive board / executive board members, general manager /
assistant general manager, internal auditor and audit committee members in the companies that are
within the scope of BIST (Istanbul Stock Exchange) corporate governance index is made. After
qualitative data was obtained in the study, the data was analyzed in SPSS medium.
Summary
The technological developments and globalization case occurring in the world brought many
alterations both in social and economical life. Because the managements are no longer formations that
are one-man businesses and have limited staff; but the formations that the ownership structure is more
complex and have a large number of staff, the changes are obliged by directly affecting management
philosophy. Internal control system not only provide maximization in the efficiency of work processes
in order that the managements reach their aims and protection of assets of the management in the
62
meanwhile, but also is a process that gives reasonable guarantee at the points of assurance of financial
reports’ accuracy and legislative harmonization.
In 1940s, the frame of internal control concept which was first defined with the reports that were
issued in USA was developed with the developments and changes occurred in the following years.
Internal control system is related to all tasks that must be done in managements in order to administer
the managements in a better way. Beside the design, execution and control of work processes, some
other tasks such as protection of management assests, legislative harmonization, and risk management
are in the frame of internal control system in order that managements reach the goals. Internal control
system is an assurance not only for management owners but also for staff personnel and moreover, it is
a dissuasive factor for cheats and corruptions that can be done by both staff personnel and managers.
The confidential financial reports that will be obtained with the helps of internal control system will be
very effective for the decisions of the enterprisers who are very fundamental for the managements and
they will provide competition advantage in managements. Internal control system is in a flexible
structure that modernize itself according to the needs of the management, so this situation plays an
important role for the success of the management. In addition to all these, that the internal control
system will be a basis for supervision studies must not be forgotten.
The place and importance of internal control is obviously inevitable for the managements which are
trying to participate globalizing world economy. For being successful, the managements should
establish an internal control system that is flexible in cost benefit axis, alterable and developable
structure and they should make necessary updates in accordance with their needs. From this
perspective, internal control concept will keep on being an issue that is being cited more each passing
day and spoken about it.
The corporate governance - that is started to be spoken all around the world with the bankruptcy of
companies such as Enron, Global Crossing, WorldCom ,which occurred in USA at the beginning of
2000s, which have actually older roots, and its importance is understood better each passing day – is
the work of balancing the rules handled in the operation of management and control mechanisms of a
management and benefits of all groups that are related to management besides the application method
of these rules. Corporate governance includes all fields of managements such as the work processes
that the management must follow while reaching goals, performance values and activity results and it
provides a basis for a good management. Moreover, it provides a fair management philosophy by
avoiding clash of interests among all interest groups that have relations with management.
Both international economical crisis and big company scandals emphasized the importance of
corporate governance applications one more time. After the developments that occurred, many
63
countries, especially USA and our country Turkey, take a firm action for including corporate
governance principles that are based on equity, transparency, accountability and responsibility to their
country’s regulations. It is clear that applying corporate governance by internalizing without
considering it as an obligation will provide many benefits such as opportunity of finance with low
cost, usage of management sources more active and productive, enhancing the endurance of
managements against risks. At the same time, that the corporate governance serves maintainability that
is very important case for managements is another very important aspect. Corporate governance is also
a very important concept for countries because of some definite factors such as decreasing the effects
of financial crisis on country’s economy, enhancing the country’s public opinion on international
arena, its contributions to production and employment opportunities.
In accordance with the globalizing world economy and changes it bring, building managements on a
solid ground and providing stability at macro scale will be in direct relation with their approaches to
corporate governance applications of first managements and then countries. Corporate governance
issue is started to be mentioned for many organizations that we can exemplify as national
managements, small and medium sized enterprises (SME) family managements, public enterprises,
non-governmental organizations, sport clubs with multinational managements.
In the study, effects of internal control system on corporate governance are tried to be determined. For
this purpose, survey study was sent to chairman of executive board / executive board members,
general manager / assistant general manager, internal auditor and audit committee members of 49
companies that are within the scope of BIST (Istanbul Stock Exchange) corporate governance index
and data which can be used in analysis is obtained from 38 companies. After qualitative data was
obtained in the study, the data was analyzed in SPSS medium.
Keywords: Internal Control, Corporate Governance, BIST (Istanbul Stock Exchange)
64
Sustainability Reporting in the Light of European Union Regulation and Recent Trends
/ Prof. Dr. Hasan Kaval
Prof. Dr. Hasan Kaval
Abstract
Sustainability in accounting and the reporting of the non-financial information are becoming more and
more important today for numerous firms. There are regulations issued by relevant institutions (non-
government organization) on the subject of the report, the essence of the information reported, when
and how the report will be announced. However, these regulations vary by country. There is no
legislation in all countries (except EU). But only European Union member countries has some
legislation in the name of 2014/95EU Directive and 2013/34/EU. These regulations issue the
disclosure of non-financial and diversity information by certain large undertakings and group is the
sole legislation on the matter of sustainable reporting.
The directive came into force with all the articles as of 2017 fiscal year. It is expected to set an
example for countries, such as Turkey, that are yet to legislate these sorts of regulations therefore, this
paper’s focus is the discussing this directive and how it can be imported to Turkish legislation.
Neither this directive nor the regulations issued by non-governmental organizations didn’t include
details, they state brief the subjects to be reported and they should be reported. Details and format are
left to initiatives of firms. According to the directive, the topics that information about should be
reported are as follows:
efforts to fight environment pollution (emissions of greenhouse gases, water consumption,
widespread renewable energy use, biodiversity, health and environmental security),
precautions for employees (no gender discrimination, work conditions, unionization level,
work security),
social protection and welfare (relationships with local and national institutions, social welfare,
sponsorships, social relief),
respect to human rights (precautions taken to protect human and employee rights),
efforts to prevent corruption, illicit money, undisclosed relations with politicians.
Atılım University
65
Aside from those mentioned, there is one point obligatory to be explained in the report –the diversity
policy, which refers to the distribution of the executive offices and board in terms of gender, age,
education, geographic regions and lines of work. It should be noted that the topics are not limited to
these and they should be regarded as references for more. All the important financial information
regarding a firm’s future and outer environment should be presented in the report.
These aforementioned topics should be presented with the following information:
a brief description of the undertaking's business model,
a description of the policies pursued by the undertaking in relation to those matters, including
due diligence processes implemented,
the outcome of those policies,
the principal risks related to those matters linked to the undertaking's operations including,
where relevant and proportionate, its business relationships, products or services which are
likely to cause adverse impacts in those areas, and how the undertaking manages those risks,
non-financial key performance indicators relevant to the particular business.
Additionally, information on risks relevant to the topics mentioned above that generate from a firm’s
activities, any precautions if taken or the reason for not should be explained. These risks are not the
ones that take place in an activity report, such as the external financial risks, but non-financial risks
such as about environment and employees.
The directive does not require firms to obtain an approval or opinion from independent auditors. The
auditors should write the report, and expected to confirm to authorities whether or not the report is
published. However, it does not prohibit firms from obtaining an audition report if it they wish to.
Turkish legislation on writing and publication process of this report is non-existent. Therefore, a
sustainability report of this sort is not necessarily subject to audit. It is also not prohibited for the firms
to request an audit from a professional institution. In this case, there is the uncertainty of that the
approval should be given by independent auditing firms or another institution.
In our opinion on this issue is, even though the first option that comes to mind are the independent
auditor, this might yield both positive and negative results at the same time. It is a fact that auditors are
among the outsourced people and institutions that are familiar to the firms the most therefore, they are
reliable sources of information in the topics related to the report.
They can audit the integrity of the information provided but can they inspect the adequacy of the
information better than an expert of the subject? Can they audit a report better than an expert on the
66
report that, on specific topics, is required to adopt a framework developed by institutions that issue
standards on the topic.
Article 19 a (1) of the directive if the report involves a general framework in the writing process, this
framework is required to be disclosed. For instance, the question comes down to whether an expert in
accounting can assess a reports’ compliance with the commonly used standards ‘Integrated Reporting’
by IIRC or ‘G4’ by GRI better than an expert who consults reports on these standards regularly. The
directive of EU has accurate articles on the matter, assigning these responsibilities to experts of the
topics, not the accounting auditor.
The last problem about the matter is a little bit different. As required by Turkish trade law,
independent auditors write a report of consistency of the activity report with the actual financial
information. If the information required by the directive to be in the activity report of the firm rather
than an individual report, then the auditor is expected to state opinions on non-financial information.
However, the audit contract do not typically involve such obligations, due to the fact that audit of
these sorts of information is reported under another set of assurance standards (International Assurance
Auditing Standards 3000 ‘Assurance Audits Except Independent of Limited Independent Audit of
Historical Financial Information’). According to those standards, another contract is not required
therefore, arises the need for a regulation by an authorized KGK.
The trend in Turkey had more Turkish firms than expected to adopt the standard of sustainability
reporting. In a research funded by EU, it is revealed that many firms tend to include non-financial
information on their websites or publications, if not in their activity report14
. Borsa Istanbul (Istanbul
Stock Exchange) issues a sustainability index, involving 63 firms. Additionally, according to a
platform of 96 institutions that took a part in the development of sustainability reporting, 191 out of
248 firms adopt G3 and G4 sub models of GRI when reporting25
.
As described above, sustainability reporting has already initiated in Turkey. The lack of regulations
might be exploited therefore, Ministry of Trade and Public Oversight, Accounting and Auditing
Standards Authority should bring regulations into force.
Keywords: Sustainability, Reporting
41
The research can be reached at https://tisk.org.tr/wp-content/uploads/2016/04/CSR.pdf Access Date: 23.9.2017 52
http://www.kurumsalsurdurulebilirlik.com/tr-tr/hakkimizda.aspx Access Date: 23.9.2017
67
The Role of Internal Auditing in Integrated Reporting / Assist. Prof. Dr. Hakan
ÖZÇELİK - Assist. Prof. Dr. Mahmut Sami ÖZTÜRK
Assist. Prof. Dr. Hakan ÖZÇELİK
Assist. Prof. Dr. Mahmut Sami ÖZTÜRK
Abstract
The global problems that arise as a result of environmental and economic fluctuations around the
world are increasing day by day. Along with the increasing competition conditions in the markets,
rapid consumption of natural resources and energy, increases of wastes, increases in transportation and
raw material costs and economic fluctuations affect companies in a negative way and keep them under
pressure.
Under these conditions, companies need to give more importance to sustainable development for an
effective corporate governance mentality. In the United Nations Environment and Development
Report, sustainable development is defined as the ability to meet the needs of today's generations, and
also enabling future generations to meet their own needs. Sustainable development is a process that
requires the protection of the resources needed by the social, economic and environmental systems.
For sustainable development, companies should focus on financial, social and environmental issues.
Because of the fact that environmental, social and managerial risks affect the continuity of companies,
investors have begun to demand financial information and non-financial information. In this context,
integrated reporting that includes the financial and non-financial information, becomes more of an
issue. According to the King Report, integrated reporting is a report that handles the company's
financial and sustainability performance in an integrated manner. Integrated reporting, which is
required in terms of corporate transparency and accountability, aims to create a sustainable and
flexible organizational structure oriented towards long-term strategic and sustainable objectives rather
than short-term financial objectives.
According to the IIA’s International Standards for the Professional Practice of Internal Auditing
Standards, internal audit processes must assess control processes, company and risk management
using a systematic, disciplined and risk-based approach and also they should contribute them. Internal
Süleyman Demirel University, Isparta, Turkey, [email protected] Süleyman Demirel University, Isparta, Turkey, [email protected]
68
auditors should think proactive and also they should take into consideration the future impacts when
making an assessment. In this respect, the reliability and value of internal audit increase.
Internal auditing units are critical in the process of preparing integrated reports and are in constant
interaction with other partners of the integrated reporting process. There is a need for expertise and
foresights of internal audit to be able to generate integrated reports. In the preparation of integrated
reports, senior management and technology have a significant place. At the same time, internal audit
can play an important role in integrated reporting processes by providing assurance and consulting
services for management and integrated reporting processes. To achieve this, the capabilities and
capacity of the internal audit department should be developed in accordance with integrated reporting
processes.
The role of internal audit, which provides an independent assurance service, is to provide the
necessary assurance about company sustainability to investors by providing integrity and transparency
in integrated reporting. The assurance role of internal audit can be achieved through assurance on
various financial and non-financial functions, management assessments, risk management and control
processes that supports the main objectives of integrated reporting. Verification of non-financial
information by independent assurance providers is vital. The organizations that will provide assurance
for the correctness, integrity and validity of the information that is used by stakeholders, is significant.
These organizations are usually independent auditors. However, internal auditing is especially
important in terms of access to non-financial information and auditing of information generation
processes.
In order to ensure that investors have confidence in integrated reporting, the effectiveness of internal
audit assurance needs to be increased. For this reason, it is important that internal audit departments
loyalty to international auditing standards and generally accepted integrated reporting principles.
In addition to assurance services, internal auditing can be developed to provide advice and consultancy
services, depending on the roadmap of company and the effectiveness of the reporting process. Well-
sourced, appropriately positioned and technologically-driven internal audit function has the potential
to identify the key trends and opportunities to create or maintain strategic business value or revenue.
In addition, the internal audit function can proactively report on issues such as financial performance
and sustainability processes. In this study, it is aimed to emphasize the importance of internal audit in
integrated reporting by conducting a research on the role of internal audit in integrated reporting.
Keywords: Sustainability, Integrated Reporting, Internal Auditing.
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Integrated Reporting of Global Corporations: A Content Analysis Based on Integrated
Reporting Examples Database from 2011 to 2016 / Prof. Dr. Seval KARDEŞ
SELİMOĞLU - Res. Ass. Gül YEŞİLÇELEBİ
Prof. Dr. Seval KARDEŞ SELİMOĞLU
Res. Ass. Gül YEŞİLÇELEBİ
Abstract
Recently, more corporations disclose both financial and non-financial information about their
organization. This study aims to reveal integrated reporting situation in the world. For this purpose,
the study has been done by using content analysis aimed at all reports which are in integrated
reporting examples database on August 2017. According to the data obtained from the database, total
of 322 integrated reports were published in the world between the years 2011 to 2016. While the
reports examine, organization profile (sectors of organizations, at which region they operate,
organization type) and general features of integrated reports (published report name, published year,
content elements, guidelines principles, fundamental concepts identified in the integrated reporting
framework) were identified as two main criteria in the study. The study results showed that increase
published integrated reports day by day. There were only four organizations that published an
integrated report in Turkey. Moreover, in most of the reports in the database, information about
guidelines principles and content elements that identified in the integrated reporting framework
determined as stated in the annual reports of organization. Corporate reports that published namely as
integrated annual reports have been found to be most in South Africa. In addition, several reporting
awards were given by 11 organizations, the most awards in the field of integrated reporting was given
African organizations. Mainly integrated reports were prepared by organizations which in operate
financial services sectors.
Keywords: Integrated Reporting, Corporate Reporting, Corporate Sustainability, International
Integrated Reporting Council, Content Analysis.
Anadolu University, [email protected]
Gumushane University, [email protected]
70
A New Perspective in Public Sector Auditing: Ethics Audit / Yaşar UZUN
Yaşar UZUN
Abstract
The International Standart of Supreme Audit Institutions (ISSAI 5130) states that sustainable
development is development that meets the needs of the present without compromising the ability of
future generations to meet their own needs. This definition requires effective, economic and efficient
use of resources available in our environment, obtaining and consuming our needs as much as our real
needs without compromising the needs of future generations by taking into account our real life
balance and quality. Therefore, sustainable development encompasses social, environmental and
economic dimensions. It also includes an ethical aspect by nature. Today, the violation of ethical
standards that shape the behaviours of actors in civil society, private sector and public sector causes
global problems such as hunger, drought, poverty, environmental pollution etc. and prevents
sustainable development. Expectation changes of citizens from public services and public bodies,
increasing demands about more democratization and transparency, and the prevention of sustainable
development are making the development of an ethics-based public sector an item in the agendas of
many countries.
The International Standard of Supreme Audit Institutions (ISSAI 100) states that public-sector
auditing helps to create suitable conditions and reinforces the expectation that public-sector entities
and public servants will perform their functions effectively, efficiently, ethically and in accordance
with the applicable laws and regulations. The International Standard of Supreme Audit Institutions
(ISSAI 12) states that public sector auditing, as championed by the Supreme Audit Institutions (SAIs),
is an important factor in making a difference to the lives of citizens. Here, we should ask ourselves
how public sector auditing can help public-sector entities and public servants to perform their
functions ethically? Therefore, it is an important issue to discuss what kind of role Supreme Audit
Institutions will take on in public sector to promote ethics/integrity. This issue also has a place on the
agenda of the international organisations of Supreme Audit Institutions. EUROSAI Task Force on
Audit & Ethics (www.eurosai-tfae.tcontas.pt) has recently developed a guideline with the title “Audit
of Ethics in Public Sector Organisations”16
and made it public. OECD has developed an ethical
Principal Auditor of the Turkish Court of Accounts
61 EUROSAI Task Force Audit & Ethics (TFAE) Guideline, (2017), “Audit of Ethics In Public Sector
Organisations, http://www.eurosai-
tfae.tcontas.pt/activities/Papers/Activities/Guidance/Guidelines%20to%20audit%20ethics.pdf, (22.06.2017)
71
infrastructure concept in recent years, and today it is known as integrity framework. It includes
several elements, and they can be classified under the umbrella terms as “guidance”, “management”
and “control” according to the main functions they serve.7
As mentioned in the aforementioned guideline, the main purpose of an audit of ethics is to strengthen
ethics management and ethical conduct in the public sector and to ensure good governance. An ethics
audit focuses on the ethical management infrastructure in place. Therefore, Supreme Audit
Institutions can audit ethical management infrastructure/ components of this infrastructure of public
bodies within the SAIs mandates through their ethics audit.
By conducting ethics audit and developing well-based recommendations, Supreme Audit Institutions
can directly or indirectly have positive impacts on public sector and sustainable development. It is
expected that the trust of the citizens in state, public sector and state of law in place will increase
through ethics audit. Since this audit will promote the production and delivery of public services
according to the agreed service standards, the risk of any possible discrimination in the society will be
eliminated. Due to the ethical sensitiveness and awareness to be developed by means of ethics audit,
the life quality of citizens can be enhanced in each public service area. One of the other important
contributions of conducting ethics audit is the protection of environment by promoting that public
resources including natural resources are acquired, preserved and utilized in accordance with agreed
ethical standards.
In order to maximize the contributions of ethics audit to the public sector and sustainable
development, there are some responsibilities SAIs should take on. SAIs, if they consider making
ethics audit a part of their main works, should follow a strategic road map. SAIs should develop their
own ethics audit methodologies by taking into account the international best practices and audit
guidelines and share them with their stakeholders to make them familiar. SAIs should also follow the
potential risks to be encountered and implement due control activities in time. As independent and
expert organizations with privileged positions in public sector, SAIs can be pioneering institutions by
adding value to the life quality of citizens, maintaining ethics-based public sector culture and
contributing sustainable development through ethics audits.
7 EUROSAI Task Force Audit&Ethics(TFAE) Paper, (2013), Supporting SAI To Enhance Their Ethical
Infrastructure, Part I A general overview of SAI’s ethical strategies and practices, p.5 http://www.eurosai-
tfae.tcontas.pt/activities/Papers/Activities/Ethics%20within%20SAIs/Ethics%20within%20SAIs-Part%20I%20-
%20overview/Ethics%20within%20SAIs%20-Part%20I-overview%20(EN).pdf, (22.06.2017)
72
The main purpose of this paper is to share and discuss the ideas on why SAIs should conduct ethics
audit in public sector, what the contents of ethics audit are and what possible impacts it can create for
public sector and sustainable development. By benefitting from the aforementioned guideline of the
EUROSAI Task Force on Audit & Ethics, the paper analyses the purposes of the public sector
auditing and the reasons why ethics audit should be conducted in public sector by SAIs. This analysis
also includes possible contents and benefits of ethics audit in public sector. As a result, by taking into
account the possible benefits of ethics audit, SAIs should focus on ethics audit strategically in order to
help public-sector entities and public servants perform their functions ethically and to contribute to
the sustainable development.
Keywords: Ethics Audit, Ethical Infrastructure, Sustainable Development.
73
The Certification of Tax Declarations – The New Role of Auditors. Albania’s Case /
Marsela SHPERDHEJA - Prof. Dr. Sotiraq DHAMO
Marsela SHPERDHEJA
Prof. Dr. Sotiraq DHAMO
Abstract
The Financial Reporting quality and reliability is a very important factor for the stakeholders on the
process of economic decision-making, as well as, for the development of a strong and sustainable
economy. The external auditors play a key role in assessing the quality and reliability of financial
reporting information. One of the main stakeholders of Financial Statement's information is the Tax
Authority, which require sufficient certainty in fair declaration of the tax liabilities from taxpayers. The
calculation by the companies of the tax liabilities is based on accounting and on the tax law. The tax
authorities perform the tax audits regarding the accuracy and reliability of the declarations made by the
taxpayer. But this process requires human, financial and administrative costs for these authorities to
accomplish this mission successfully. In attempt to strengthen the fight against tax fraud and tax evasion,
Albanian tax authorities have begun to apply the tax audit approach based on risk management analysis,
evaluating the indicators related to the risk of tax evasion and the information distortion in financial
reporting such as elements related to sales performance, sustainability of financial indicators,
sustainability of fiscal declarations and among other things, the audit reliability of the financial
statements, as well. To improve the process, the Ministry of Finance and the Albanian Government
evaluated that one of the effective ways is to include and collaborate with a range of qualified external
auditors to evaluate and certify, specifically, the quality of fiscal declarations, resulting in a deduction of
the audit costs by the tax authorities, which will be concentrated in those entities that have a higher level
of risk. The selection of these audit companies will be done by Ministry of Finance based on some
criteria. But not all the certified external auditors have been qualified as reliable for this important
mission. On the other hand, the ones qualified would suffer penalties jointly with the taxpayer for the
evaluated tax evasion from the fiscal authority. This approach was reflected in the latest legislation
amendments, and an article under which represents that, if a taxpayer is certified by recognized auditing
companies (qualified as such by the requirements of the specific law), which confirm that tax declarations
are in accordance with fiscal legislation requirements, then the fiscal authorities include this element in
FEUT
FEUT
74
the risk analysis of the taxpayer. Ministry of Finance has already invited and selected 10 audit companies,
by qualifying them for the certification of tax declarations. This has been stated in the official
announcement regarding to the competitive procedure "Maximizing the contribution of the audit
companies to the certification of tax declarations, which will serve as an element in taxpayer risk analysis,
we encourage all audit companies that meet the criteria to take part in the competition procedure for the
listing of audit companies”.
The main purpose of this paper is to highlight the reasons of this practice, the role and importance of this
new practice in our country in the fight against tax evasion and informality, the possibility of the
effectiveness of this approach, the evaluation as a new service for the Albanian auditors and the impact
that would also appear in the improvement of financial and fiscal reporting. Also one of the purposes of
this paper is to analyze the relationship between the certification of tax declarations offered by auditors
and informality, sustainability and development of our country over the upcoming years. To fulfill the
aim of this paper, it has been reviewed a wide existing actual literature related to this topic as a secondary
data source and questionnaires directed to the main stakeholders of this process as a primary data source.
Taking into consideration that this process is actually in the initial phase of implementation, and remains
voluntary as well, will be used the qualitative researches based on direct observation of the preliminarily
feedback and perception of the relative stakeholders which plays a key role in this process. The
population selected to be observed in the survey mainly are auditors, tax employee, businesses, managers.
Literature review has shown that developed countries have used different methods at various stages of
their development to involve auditors in the process of declarations evaluation. Generally developed
countries have evaluated and rated auditing companies and use this assessment in the process of selecting
taxpayers for fiscal auditing or not. While the specific approach currently selected by the Albanian
government is not evidenced to be widely implemented in the developed countries. This approach is
mostly a recommendation of international organizations to developing countries which have a high level
of informality and tax evasion, issue that has been also, emphasized as one of the most challenging goal to
achieve in the process of the European Integration.
This approach neither avoids tax controls for taxpayers audited by the qualified audit companies, nor
excludes the responsibility of the audit companies from the tax penalties, but charges them jointly about
the responsibilities and penalties of the tax law requirements. The study analyzes the feasibility and
effectiveness of implementing such a new service for auditors under the specific conditions of this
regulation.
75
However, in the Albania the findings of this study based on descriptive analyses of primary and
secondary sources clarify that the new role of auditors in the field of certification of tax declarations is
expected to contribute positively to the achievement of sustainable development goals, although
continuous efforts are necessary to be made revising the law requirements and improvement of the
effectiveness of this process. Nevertheless, the time and further developments will remain the most
accurate estimators of the impact of this audit initiative at a national level in the sustainability and
development of our country, in fighting the informality and the tax evasion.
Keywords: Tax Audit, Tax Evasion, External Audit, Certification of Tax Declarations, Informality
76
The Effects of Supreme Audit Institutions’ Independency on Fiscal Sustainability: A
Survey about Turkey / Sinem YALÇIN
Sinem YALÇIN
Abstract
In recent years, the important problem for countries is not only to ensure the macroeconomic balances
but also to keep the economic balances. In this sense, fiscal sustainability becomes popular for
economic literature. Although there is no common definition about fiscal sustainability, it can be
described that governments have ability both to pay their debts and to keep the political programs.
The term of fiscal sustainability includes public debt sustainability and budget deficits’ sustainability.
But usually the variable of public debt sustainability is used to measure fiscal sustainability. Public
debt sustainability is very important for economies to ensure fiscal discipline. In the simplest way, the
rate of public debt stock to national income is constant for a long time, it means that public debt stock
is sustainable. In economic literature, public debt sustainability is measured by the data of primary
surplus. Primary surplus is calculated that public expenditure extracted from public revenue except
interest expenditure.
Successful public debt management is crucial to provide public debt sustainability. The main objective
of public debt management is to ensure that the government's financing needs and its payment
obligations are met at the lowest possible cost over the medium to long run, consistent with a prudent
degree of risk. In budget cycle, Supreme Audit Institutions (SAIs) are very important to ensure the
public debt sustainable. The main purpose of debt auditing is to obtain reliable information for
citizens. Supreme Audit Institutions have a critical role on the development strategies by auditing
public resources.
SAIs’ are useful to ensure transparency and accountability when they are independent from the audited
institutions. Independency is the corner stone of effective Supreme Audit Institutions. For these
reasons, the effects of SAIs’ Independency on the Sustainability of Public Debt is studied.
When external auditors work independent, information costs and principal agent problem decreases
and fiscal transparency increases. By this way, public expenditure and public debt decreases. So, there
77
two relationships become important: First, the size of primary surplus is affected from public revenue
and public expenditure, secondly, SAIs’ independency effects public revenue and public expenditure.
Consequently, SAIs’ independency effects primary surplus and public debt sustainability.
As a result, the purpose of this study is to analyze the effects of independence of SAIs’ on public debt
sustainability which is an indicator of fiscal sustainability. For this reason the relationship between the
independence of Turkish Supreme Audit Institution and public debt sustainability is examined for the
years 2006 to 2013. At the end of the study, it is reached the results that when the SAIs independence
is increase, public debt decreases and it contributes to ensure public debt sustainability.
Keywords: Fiscal Sustainability, Supreme Audit Institutions, Independence
78
Auditors’ Perception of Expanded Audit Reports: Is It Useful or Not? / Assist. Prof. Dr. Ayşe
Nilgün ERTUĞRUL - Res. Ass. Gizem ÇOPUR VARDAR
Assist. Prof. Dr. Ayşe Nilgün ERTUĞRUL
Res. Ass. Gizem ÇOPUR VARDAR
Abstarct
Problem: Public interest is the central theme of financial reporting for auditing and accounting standards
(Lundgren and Oldenbork, 2016: 1). By the accounting scandals, the public’s trust in the auditing industry
declined (Asare and Wright, 2012: 194). Because of the majority of the failed institutions received
unqualified opinion, legitimacy of auditing in the society was impaired (Dooger et al, 2015: 359; Sikka,
2009: 869; Ruhnke and Schmidt, 2014: 573, Yanık and Karataş, 2017: 3). It is essential that management
and the board, accountants and auditors, standard setters and regulators should accept that they are
accountable and they must supply honest and full reports (Taylor, 2003: 161). Even if investors are reliant
on the auditors’ commitment to the public interest, they expect auditors to act according to the investors’ best
interest throughout the auditing process (Lungren and Oldenbork, 2016: 1). In other words, investors are
not satisfied with the boilerplate pass/fail model, as a result of statutory auditing, that causes audit reports to
contain largely standardized wording. Investors demand more client-specific information which is already
obtained by the auditors in the auditing process that would be useful for decision making (Lennox et al,
2017: 1; Ruhnke and Schmidt, 2014: 573).
As a response to the investors’ reasonable demand an to renew the public trust, standard setters and
regulators worldwide have implemented an expanded model of audit reports. This model is a response to
audit gaps (expectation gap, communication gap, information gap) between financial statement users and the
audit profession (Kostova, 2016: 113; Gold et al, 2012: 286; Ruhnke and Schmidt, 2014: 573). These
revisions are meant to increase the informative/communicative value of the audit report through intended
massage to be conveyed by the auditor report is received by the user (Coram et al, 2011).
Academic studies on expanded audit reports concentrate on the perception of new regulations from the view
point of investors. Most of the recent studies about expanded reporting focus on whether expanded auditing
reporting meets the expectation of investors or enhance the communication value of audit reports and decline
Ufuk University, Faculty of Economics and Administrative Sciences, Department of Business Administration,
Mersin University, Faculty of Economics and Administrative Sciences, Department of Business Administration,
79
the expectation gap between financial statement users and the audit professions (Kostova, 2016; Smith,
2016; Lennox et al, 2017; Fakhfakh, 2014; Köhler et al, 2016; Coram et al, 2011).
On the other hand, the regulations about the expanded auditing reporting bring change in terms of
procedures, auditors’ responsibility about information presented without a change in the scope of audit
(Yanık and Karataş, 2017: 5; Kostova, 2016: 114). In this study, it is aimed to disclose thoughts of auditors
as professional about expanded reporting. Whether they think new information presented in expanded audit
report is really beneficial for shareholders especially investors, outweighs the cost to auditors or cause
customer loss.
Scope: There are several changes in ISAs but the two ISAs are particularly important for our study. The
scope of the paper limited by international standards of auditing 700 and 701, which are directly related with
reporting form and content of audit reports. By ISA 700, additional disclosures on risk of material
misstatements, materiality and audit scope give users insight into the auditor’s decision process during the
audit. Also ISA 701 require additional disclosures about key audit matters that means most significant areas
in auditing and areas of significant management judgement. On other worrds which areas are focused on by
auditors in performing audit.
Purpose: This study aimed to identify the perception of new international standards of auditing about
expanded audit reporting from the auditors’ point of view. The main question is whether to present more
information in audit reports required by mentioned ISAs came into effect are considered necessary and
useful by audit professions.
Design/methodology/approach: Five Point Likert Scale survey applied to the auditors in Ankara. Factor
Analysis ( determined factors are public interest, auditor-client company relationship, metariality of
infirmation and cost-benefit), Correlation Analysis and Frequency Analysis applied to questionaire.
Questionaire is tested whether sampling (48 observation) is adequate for factor analysis by KMO (Kaiser-
Meyer-Olkin) test (0,615). Also Bartlett’s Test for Sphericity shows that correlation matrix of factors is
identity matrix (Chi-square: 233,490 p: 0,00<0,05). Preliminary tests show that validity and suitability of the
responses collected to the problem being addressed through the study. So it can be said that sampling is
adequate and recommended suitable to check the case to variable ratio for the analysis being conducted.
Conclusion: The variance ratio of four factors is %72,362 that means determined four factors (public
interest, auditor-client company relationship, metariality of infirmation and cost-benefit) describe the
%72,362 of coefficient of variance. It can be said that as we claim the changes in the new/revised ISAs
represent the four factors according to the variance test.
80
For the correlation analysis two scenarios is determined. The first scenario is auditors are in the opinion of
“there will be new and useful information in expanded audit reports and this will make audit reports more
useful” and the second scenario is auditors are in the opinion of “there will be new information in expanded
audit reports but new information will not cause the audit reports to be more useful”. One main and two
supportive hypothesis are written for each scenario. For the first scenario hypothesis are;
Hypothesis 1: New/Revised ISAs are useful because regulations will increase transparency and efficiency of
audit reports. (supported by strong and weak possitive correlletion between related questions)
Hypothesis 2: To serve the public interest the auditor have to disclose; material misstatement, material
transaction and events, judgments on critical accounting estimates, significant professional judgment in
forming an opinion, significant professional judgment about client-company. (supported by moderate
possitive correlletion between related questions)
Hypothesis 3: New/revised ISAs are more appropriate than previous ones for audit reports, to fulfill its
purpose, to serve the public interest. (supported by moderate negative correlletion between related questions)
For the second scenario hypothesis are;
Hypothesis 4: Expanded audit reports are confusing because of the overload information. (supported by
strong possitive correlletion between related questions)
Hypothesis 5: New information that have to disclosed in expanded audit report will not be useful because
they are not suitable for cost-benefit assessment. (supported by moderate possitive correlletion between
related questions)
Hypothesis 6: some new information that have to disclosed by the new/revised ISAs are can be sensitive and
cause loosing the client. (supported by moderate possitive correlletion between related questions)
Result for the first scenario: Some of the participants thinks that new form and content of audit
reports are useful because regulation provide new detailed information about the company being
audited. This group of participants also thinks that serving public interest is the priority of auditors
and new information will be useful for users in decision making process. Moreover this group thinks
that new audit reports complete the missing part of previous standards by revealing significant
professional judgements in audit reports.
Result for the second scenario: This group is reluctant to changes because auditors will need to
invest more time and effort into new audit reports but new reports will be confusing and won’t
contribute to decision making process of users. Also they believe that additional information add no
value and objectives set out by IAASB will not be achieved. Moreover, new audit reports cause audit
firms increase the risk of loosing the client-company.
81
Result for the frequency analysis: Nearly % 81 of the participants think that there will be new and
useful information in expanded audit reports in other words believe the scenario 1 and %19 of the
participants think that there will be new information in expanded audit reports but these information
will not be useful in other words they believe scenario 2.
More of the participants are in the opinion that new audit report will be useful according to
frequency analysis. On the other hand, there is a group of the participants who think that these
standards are not useful. Degree of belief of participants who think that second scenario will be
valid is more strong than the participants who think that fisrt scenario is valid, according to the
correlation analysis unless the percent is small.
Content: The first section is about, to explain the baseline of grouping the questions factor anaylsis based
on theoritical framework, puıblic interest and auditors’ boundries while performing audit. Second section is
about audit gaps to clarify why we focused on infirnation gap (expectation gap, communication gap and
information gap) . Third section is going around the ISA 700 and ISA 701, to determine the requirements of
the regulations for expanded auditing reporting in terms of audit report form and content. And the last
section is about the research desing, methodology, approach and findings.
Keywords: Expanded Audit Report, Auditors’ Perception
References
Asera S.K and A. M. Wright. 2012. “Investors', Auditors', and Lenders' Understanding of the Message
Conveyed by the Standard Audit Report on the Financial Statements” Accounting Horizons 26
(2):193-217.
Coram, P. J., T. J. Mock, J. L. Turner, and G. L. Gray. 2011. “The Communicative Value of the Auditor’s
Report”. Australian Accounting Review 21 (3): 235–252.
Doogar, R., S. P. Rowe, and P. Sivadasan. 2015. “Asleep At the Wheel (Again)? Bank Audits during the
Lead-Up to the Financial Crisis”. Contemporary Accounting Research 32 (1):358–391.
FakhFakh M. 2014. “Linguistic Performance and Legibility of Auditors’ Reports with Modified Opinions:
An Advanced Investigation on the ISAs on Audit Reports” Asian Review of Accounting 24 (1):105-
130.
Gold A., U. Gronewold and C. Pott. 2012. “The ISA 700 Auditor’s Report and the Audit Expectation Gap-
Do Explanations Matter?” , International Journal of Auditing 16 (3):286-307.
Köhler A.G., N.V.S. Ratzinger-Sakel and J. C. Theis. 2016. “The Effects of Key Audit Matters on the
Auditor’s Report’s Communicative Value: Experimental Evidence from Investment Professionals
and Non-professional Investors” paper presented in 2016 International Symposium on Audit
Research (ISAR 2016).
82
Kostova, S. 2016. “Opportunities for Enhancing Informative Value of Audit Reports”, Проблеми теорії та
методології бухгалтерського обліку, контролю і аналізу (Theory and Methodology of
Accounting, Control and Analysis), 1, 113-121.
Lennox C. S., J. J. Schmidth and A. M. Thompson. 2017. “Is The Expanded Model Of Audit Reporting
Informative To Investors? Evidence from UK”, paper presented in 2016 International Symposium on
Audit Research (ISAR 2016).
Lundgren L. and M. Oldenborg. 2016. “The Public Interest Paradox of The Swedish Auditing Profession: A
quantitative study of potential effects of Swedish auditing profession”, unpublished thesis, UMEÅ
Unıversitet, Umea School of Business and Economics.
Ruhnke K. and M. Schmidt. 2014. “The Audit Expectation Gap: Existence, Causes, and the Impact of
Changes” Accounting and Business Research, 44 (5): 572-601.
Sikka P. 2009. “Financial Crisis and the Silence of the Auditors” Accounting, Organizations and Society 34
(6-7): 868–873.
Smith K.C. 2016. Tell Me More: A content Analysis of Expanded Auditor Reporting in the United
Kingdom, unpublished dissertation, Texas A&M University.
Taylor B. 2003 “Corporate Governance: The Crisis, Investors’ Losses and the Decline in Public Trust”
Corporate Governance and International Review 11 (3):155-163.
Yanık S. and M. Karataş. 2017. “Denetim Raporlarının Geleceği: Yeni Düzenlemeler ve Ülke Uygulamaları”
Muhasebe ve Finansman Dergisi, Ocak (2017): 1-26.
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Impact of New IFRS 9 Standard on Bank Audits / Medine TÜRKCAN - Res.Ass. Buket
ATALAY - Assist. Prof. Dr. Soner GÖKTEN
Medine TÜRKCAN
Res.Ass. Buket ATALAY
Assist. Prof. Dr. Soner GÖKTEN
Abstract
International Accounting Standards Board (IASB) has started to work in 2009 for creating a new
standard on financial instruments by considering the negative effects of global financial crisis of 2007
– 2008. In 24 July 2014, IASB released final version of “IFRS 9: Financial Instruments Standard” to
be implemented in reporting periods starting from 1 January 2018 onwards and aimed to replace IAS
39.
IFRS 9 Financial Instruments Standard was firstly published in Turkey in 27/04/2010 by Turkish
Public Oversight and Accounting Standards Board (KGK). There has been some revisions in the first
version of IFRS 9 between 2011- 2015 and final implementation date of the standard was defined as
the reporting period beginning on or after 1 January 2008, as parallel to the implementation date
announced by IASB.
According to IAS 39, the main standard on financial instruments before IFRS 9, financial assets are
classified into four categories as held to maturity, available for sale, financial assets at fair value
through profit or loss and loans and receivables. IFRS 9 abolish this classification of IAS 39 and
classify financial instruments in two categories as 1- measured at amortized cost 2- measured at fair
value (This second category is divided into two sub categories as 2.1- fair value through other
comprehensive income and 2.2-fair value through profit or loss).
The new classification of IFRS 9 aims to classify financial assets according to business model and
nature of contractual cash flows of an entity. This new classification criterion of IFRS 9 especially
affects banks and it requires for banks to reevaluate their classification models in classifying financial
CPA, Başkent University, Phd Student in Accounting and Finance, [email protected]
Başkent University, Management Department, [email protected]
Başkent University, Management Department, [email protected]
84
assets. Another important change brought by IFRS is acceptance of expected loss model rather than
realized loss model. Implementation of expected loss model will also affect banks that have great
amount of financial assets, specifically loans, in their balance sheet. The biggest impact of IFRS 9 for
the banks will be on impairment provisions of loans. It is required for banks to reevaluate and adjust
their provisioning calculation systems and loan management mechanisms in line with newly
introduced rules of IFRS 9 and expected loss model.
Before IFRS 9, in order to book an impairment loss for a particular loan, it conditions that actual
default should occur in other words the loss should be realized for that loan. IFRS 9 introduces
expected loss model rather than realized loss model in which banks should calculate impairment
provisions for their entire loans without waiting for any default event occur. Banks should also use
extensively their internal rating systems during impairment calculations. Furthermore, the new rules of
IFRS 9 embraces a closer approach with the risk based and risk adjusted rules of Basel in credit risk
and capital adequacy calculations.
IAS 39 standard was criticized in some respects and IFRS 9 was emerged as a kind of reaction to these
criticisms. IAS 39, that was the applicable standard during the global crisis of 2007-2008, was mainly
criticized on the ground that it delayed booking of loan losses and therefore led to deepening of the
crisis. Another criticism of IAS 39 was that regulatory and auditing authorities are unable to foresee
and prevent the upcoming crisis because of the backward looking and static accounting rules of IAS
39 standard. It is stated in the criticisms that before global crisis, auditors poorly reviewed client banks
in terms of going concern principle and risk of collapse so that they were unable to foresee the bank
collapses during the crisis.
Thorough literature review on bank collapses shows that low capital adequacy and heavy investment
in risky assets are seen as main reasons for bank collapse. The loans and financial assets are the most
important items in the balance sheets of banks so that robust risk evaluation of loans has crucial
importance for going concern. However, according to rules of IAS 39, there should be an actual
default and a clear indication of deterioration in loan quality in order to book impairment and loan loss
provision. In this sense the accounting rules of IAS 39 and expectations of auditors and regulatory
authorities are not overlapping.
The new IFRS 9 standard introduces a forward looking expected loss model in loan provisioning. The
new model of IFRS 9 will also necessitates for auditors application of forward looking and risk based
auditing approach in bank audits. The application of forward looking approach in audits and loan
provisioning will increase effectiveness of going concern reviews of auditors and therefore it will
increase contribution of audits in foreseeing bank collapses.
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Another criticism of the IAS 39 standard was resulting from complex and ambiguous wording and
long sentences of the standard. It is argued that complex structure of the standard creates a favorable
environment for accounting manipulations. In IFRS 9, it is aimed to simplify complex wording of IAS
39 especially in the areas of classification criteria and hedge accounting. It is expected that new IFRS
9 standard will contribute positively to decrease manipulations on financial instruments in banks and
to make possible easier detection of manipulations during audits.
Keywords: Financial Assets, IFRS 9, IAS 39, Impairment, Audit
86
Reporting and Audit of EU Projects in Accordance with IPA II / Dr. Neslihan
ÇETİNKAYA
Dr. Neslihan ÇETİNKAYA
Abstract
In 2007, European Union merged the financial and technical help directed to candidate and potential
candidate countries under the umbrella of Instrument for Pre-accession Assistance (IPA). The
candidate and potential candidate countries are described as ‘enlargement countries’. The pre-
accession funds of the European Union help beneficiary countries make political and economic
reforms, preparing them for the rights and obligations that come with EU membership. This period can
be considered as a preparation period for becoming a member EU for the candidate and potential
candidate countries.
IPA I period a budget of 11.5 billion Euros were transferred to the enlargement countries between the
years 2007-2013. IPA I had five components which were transitional period and corporate structuring,
cross-border cooperation, regional development, human resource development and rural development.
In 2014, with IPA II period, European Union changed the five components of the instrument to five
policy areas which are public administration reform, rule of law, sustainable economy, people,
agriculture and rural development. IPA II period is determined as 2014-2020 and the current
beneficiary countries are Albania, Bosnia and Herzegovina, The Former Yugoslav Republic of
Macedonia, Kosovo, Montenegro, Serbia and Turkey.
In Turkey, with IPA II, areas and sub-areas were determined under the political approach of IPA II in
accordance with Ministry of EU affairs and the areas were divided under the responsible ministries.
All the ministries are considered as coordinating institutes of IPA II. According to the financing
agreement the responsibilities and the procedures to be followed by the coordinating institutes and
beneficiaries are explained in detail. A total amount of 4.453,90 Euros fund will be transferred to
Turkey in IPA II period and this amount will be distributed through the projects under determined
political areas and will be controlled by the coordinating institutes.
The EU Commission has provided monitoring and evaluation steps for the follow up of the fund
distributed. The monitoring part includes internal and external monitoring, in internal monitoring the
Başkent University, Faculty of Commercial Sciences, [email protected]
87
data providers are the elements of the projects such as the commission, implementing partners,
coordinating institutes or beneficiaries. In external monitoring the view is more independent and the
focus is the outcome of the processes. Internal monitoring includes reporting documents and data,
meeting notes and reviews, spot checks of the steps of the projects. In IPA II Framework agreement
the reporting and audit processes of the assistance. According to this agreement, reports should be
provided to the Commission in an annual basis explaining the implementation of IPA II assistance.
The format and index of the reports shall be determined by the financing agreement and shall include
the involvement of the IPA II beneficiary in programming, monitoring and evaluation, communication
and visibility efforts, problems encountered if any and the country strategy implementations.
Additional to the main annual reporting, another report shall be prepared including the summary of
main achievements, any significant problems encountered, quantitative and qualitative information on
the progress made and recommendations for further actions.
The annual financial reports and statements shall be prepared on an accrual basis, which is determined
in the financing agreement and will include a declaration from the IPA II beneficiary. The
coordinating institutes do not distribute the funds directly, Technical Assistance Teams (TAT) provide
the service to organize and maintain the projects under IPA II agreement. TAT is responsible for the
follow up the projects approved by the coordinating institution, recruiting specialists for the progress
of the project, planning and reporting to the coordinating institution. The reports of TAT is prepared
both monthly and annual, monthly reports are for the close follow up of the project and the payments
to be transferred to specialists and any other construction and the annual report is for the completion
rate of the project.
Auditing is explained as a part of monitoring, audit steps and schedules are determined and explained
in the framework agreement and its annexes. The financial reports and its annexes shall be audited and
evidence of audit shall be provided by the auditing authority. All the financing agreements shall be
subject to supervision, control and audit by the Commission. An auditing authority will be determined
in each beneficiary country and in cross border coordination programme, the auditing authority shall
be the one from the country where the contracting authority is located. This paper aims to explain the
steps and schedules of reporting and auditing processes according to the IPA II agreement signed
between EU and beneficiary countries. The reporting of the beneficiary countries and the reporting of
the TAT offices will be screened. The reporting and auditing part is for follow up of the steps of the
project and the usage of the grant. The paper will try to explain the contents of IPA agreement and the
reports and auditing steps of the projects to be done with tables and timing schedules.
Keywords: IPA, EU Funds, Reporting, Audit, Pre-Accession Assistance
88
A Review of the Classification and Amortization of the Hydropower Concession’s Assets
/ Dr. Majlinda MAQELLARI - Prof. Dr. Ingrit SHULI
Dr. Majlinda MAQELLARI
Prof. Dr. Ingrit SHULI
Abstract
The purpose of this paper is to study the manner of implementation of concessionary service
agreements (BOT) in Albania, the account keeping by the concessionaire and the impacts that duality
implements the standards and the fiscal legislation regarding the concessions. Since the types of
concessions are varied, we have considered one of them, concessions for hydropower plants. In recent
years, many concessions have been given to hydropower plants of different sizes. The most important
question we are asking is how these concessional agreements are reflected in the accounting policies
after the entry into force of the revised IFRS and IAS 38 and the revised NAS 13, the case of Albania.
The concessionary service agreement is an agreement whereby a government or another public sector
body (the grantor) contracts a private operator to construct, improve, use and maintain the
infrastructure assets of the concessionaires such as roads, bridges, tunnels, airports, power distribution
networks, prisons, hospitals, etc. In these agreements, the concessionaire controls or regulates what
services the operator should provide, usage of the assets, to whom it must provide and at what price,
and also controls any remaining significant interest on the assets at the end of the term of the
agreement.
In the case of concession agreements, the companies have implemented the MRS since some of them
are in the construction phase and do not reach the terms for audit by Big 4 audit firms or "Albanian
Legal Auditors". Consequently, until December 31, 2014, they have subscribed the assets received as a
Tangible Longstanding asset such as property, plant and equipment, applying NAS 5. As of January 1,
2015, with the implementation of improved NAS, these companies had to apply NAS 13 - Biological
Assets and Improved Concession Agreements. Some of these companies have changed their
accounting policy in the accounting of concessionary agreements, by transferring the assets received
from conglomerates, from tangible longstanding assets to intangible assets. But, there are companies
that have not implemented 13 improved NAS.
89
The methodology used is based on a detailed analysis of the legal framework in the area of
concessions associated with a qualitative analysis of case management and the impact that the auditing
of these companies has on the implementation of the legal framework and standards.
The paper is structured as follows: 1. General information on the matter being considered, the situation
in Albania regarding concessions; 2. National Accounting Standards and Fiscal Legislation in the
Areas of Concessions; 3. Treatment by companies with concessions and penalties from the fiscal
office.
The database is credible and will be provided by the Ministry of Energy and Industry (MEI) and from
the register of concessions in the hydropower sector. Qualitative data processing will be done by
obtaining the balance sheets of different concession companies from the National Registration Center
(NRC) for the period 2014-2015, the period in which the change of use from NAS 5 to the improved
NAS 13 occurred to view how the accounting of assets was handled by different companies. Another
qualitative data is the implementation of the NAS 13 standard for companies that have been audited by
a statutory auditor and the importance of educating economists who are unaware of this standard that
has been added in addition to NAS 13 where biological assets are handled.
It will also be studied the change that will bring this treatment into the amortization that these
companies will present in Statement of income and expenses and the conflict with the fiscal legislation
in Albania. According to Law no. 8438, dated 28.12.1998, "On Income Taxes", as amended in Article
22 where the amortization is mentioned in point 4, states: ‚Amortization on the cost of acquisition of
intangible assets is calculated for each asset, by linear method , At 15%'; This will cover years of
depreciation of 6 to 7 years, whereas in the case of concessions they are given from 25 + 10 years to
35 + 10 years according to contracts we have seen for hydropower plants, removing construction years
ranging from 3 to 7 years (depending on the capacity) and changes the depreciation rate from 4.5% to
3.2%. This treatment drastically reduces depreciation calculated under fiscal legislation and increases
profitability. As a result, profit tax increases for these societies. This is a conflict between accounting
standards and fiscal legislation. Often, societies in Albania tend to apply fiscal legislation rather than
implementing the NAS, especially the small societies, which do not reach the terms for auditing by
legal auditors. This is a high financial cost for these companies.
From the information we have from the Registry of Concessions in the Hydropower sector, in
November 2015, the number of companies with such a concession was 177, over 60% of which
received small concessions (1-2 MegaWatts production), in which the risks of non-implementation of
improved NAS 13 is high. This phenomenon occurs because the economists of these societies are not
aware of this review and therefore continue to record such concessions as Tangible Longstanding
90
Assets and not as Intangible Assets. Due to this, they have amortized under the law with a linear
method of 5% for property, plant and equipment, and have classified these active assets as tangible
longstanding assets.
The purpose of the entire study is to raise awareness among the institutions such as the National
Accounting Council (NAC), the Institute of Authorized Accounting Experts (IEKA) and the
Accountants' Organizations, as well as the Ministry of Finance to make sure that the Revenue Law
goes down the same lines as the IAS, IFRC and NAS. In the future, this study aims to encourage
revisions to the law, not only in the Hydropower field but also in other concession areas.
Keywords: Concessionary Service Agreements, Hydropower Plants
References
IFAC – IAS 38, IFRC12 – https://www.ifac.org/publications-resources
KKK – SKK 13 I I permiresuar – http://www.kkk.gov.al/faqe.php?id=1&l2=136&gj=sh,
Ligji nr8438, dt 28.12.1998, I rishikuar – per tatimin mbi te ardhurat,
LIGJ Nr. 43/2015 PËR SEKTORIN E ENERGJISË ELEKTRIKE,
LIGJ Nr.125/2013 PËR KONCESIONET DHE PARTNERITETIN PUBLIK PRIVAT,
Parada-Pole, Deloitte – IFRIC 12 Service concessionarrangements, A pocket practical guide, 02.2011.
91
Preparing and Auditing Financial Statements – Legal and Penal Consequences for the
Auditors in Albania / Dr. Mirela UJKANİ - Prof. Asoc. Dr. Rezarta SHKURTİ
Dr. Mirela UJKANİ
Prof. Asoc. Dr. Rezarta SHKURTİ
Abstract
The transformation of the Albanian economy and market after the 90s’ presented the need of undertaking
deep reforms in the accounting and auditing, as new disciplines which should be revolutionarized.
Accounting is regarded as the Language of the Business. All forms of information presented in the
accounting books of the entity, such as the information for creditors, government agencies, tax authorities
as well as the information intended for internal use, is a direct responsibility of the management of the
economic entity. In this context, the auditors, through their role, have a direct and considerable
contribution in the accounting information quality and trustworthiness. In a certain way, they guarantee
that the Financial Statements are presented in a true and fair view. On the other hand, if the financial
statements contain misleading and erroneous, or false information, which does not represent the reality of
the economic activities of the entity, the auditors are likely to face the penal and legal consequences for
allowing and “certifying” false public information.
The aim of this study is to present the current status and the importance of preparing and auditing
financial statements in Albania. Another objective of the paper is to explore the current situation of laws
and legal acts in Albania, that provide directions about the consequences that auditors face in case they
fail to perform in compliance with the requirements of their profeesion. We aim to have some conclusions
obout the situation and come up with at least several recomandations for the necessary actions that should
be undertaken by the auditing professional bodes, as well as necessary changes in the law, or the relevant
legal framework in Abania.
In the context of efforts to improve accounting regulations in order to increase the transparency and
reliability of financial information as well as to respond better to changes in international accounting,
University of Tirana, Faculty of Economics, [email protected]
University of Tirana, Faculty of Economics, [email protected]
92
market needs and the protection of public interest and the State, work began on drafting a strategy for a
new reform in the field of accounting and accountancy profession.
From 1 January 2008 the compilation of the financial statements in Albania follows the requirements of
the new Accounting Law no. 9228 "On Accounting and Financial Statements", which has undergone
continuous changes to date. Another innovation was the creation of NSIs for NPOs, where the
methodology followed during its creation was the adaptation of 14 MRSs to that extent and those issues
that are of interest to NPOs. Its implementation began on January 1, 2016.
Reforms in the field of accounting did not stop with the creation of the KAS or the accounting law, but
were also enriched with changes in other auxiliary areas such as; in the exercise of the liberal professions
where it is currently in force Law no. 10091, date 05.03.2009 "On Legal Audit, Organization of the
Occupation of Registered and Approved Accounting Auditors Approved", which aims to improve and
strengthen the public oversight of the profession of registered auditor, as well as the regulation of the
profession Of the approved accountant.
Through this law, significant reforms were made regarding the status of a trader, the establishment and
administration of trade companies, the rights and obligations of founders, partners and shareholders, the
reorganization and liquidation of commercial companies. Legislation drafted in this period including Law
no. 7638 dated 19.11.1992 "On Business Organizations" also laid the foundations for market economy
accounting. The diversity of the entities, the free market relations, the different role of economic control,
the reduction of state intervention and other features, have changed the objectives, the role and the
accounting functions.
This paper will study the challenges of accountancy profession and the ways it faces the legal
consequences of laws in Albania, in three perspectives:
First, we seek to identify the current situation and the importance of financial reporting in Albania,
through reviewing the current legislation in force.
Second, we will note the importance of the statutory audit of the financial statements, which by presenting
the recent reforms that have been undertaken, will reflect its level and impact in providing reasonable
assurance on the information that the financial statements carry.
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And third, we acknowledge that the entire range of information mentioned above constitutes the material
object of the offense "Fraud and Fake information" provided by Article 168 of the Criminal Code.
Financial accounting data and information are an important know-how as long as they are integrated with
data obtained from other sources. Due to their credibility, these data often have a special importance in
making complex decisions and this is one of the reasons for the company's legal-criminal defense in cases
of abuse. (Miti, Kurti, 2016).
Keywords: Financial Statements True and Fair View, Financial Reporting, Audit Law, Legal
Consequences.
References
Bollano, J. 2011. “Shqipëria në Rrugën e Zbatimit të Standardeve të Raportimit Financiar dhe Auditimit”
Bollano, J. 2012. “Arritjet, vështirësitë, sfidat e raportimit financiar dhe strategia e KKK për të ardhmen”.
Cerqua, L. 2011. Il nuovo delitto di omesa communicazione del conflitto d’interesi artikull i botuar në
Revistën Juridike Diritto & Diritti
Crespi, A. 2010. Studi di diritto penale societario, Giuffre Editore, Milano.
Dhamo, S. 2000. Kontabiliteti Financiar, Grevis, Tiranë.
Duhanxhiu, K. 2012. “The relationship between financial and tax accounting in Albania”, The Romanian
Economic Journal, Nr 43.
Elezi, I. 2007 Komentari i së Drejtës Penale (Pjesa e Posaçme), Botimet Erik, Tiranë.
Haxhi, L. 2012 “Zhvillimet në fushën e kontabilitetit dhe të profesioneve për kontabilitetin”, Konferenca
Ndërkombëtare e KKK 2012.
Kume, V. 2002. Marrja e vendimeve manaxheriale SHBLU, Tiranë.
Law no. 7638 date 19.11.1992 “Për shoqëritë tregtare” revised
Law no 9228, date 29.04.2004 “Për kontabilitetin dhe pasqyrat fianciare”, changed with the Law no
9477, date 09.02.2006.
Law no. 10091 date 05.03.2009 “Për auditimin ligjor, organizimin e profesionit të ekspertit kontabël të
regjistruar dhe të kontabilistit të miratuar”.
Naço, G. 2008. “Implementation of national accounting Standards and its problems in Albanian Reality”
MIBES, 829-842.
Qurku, T. 2014. “Shoqëritë shqiptare përballë realitetit të raportimit të dubluar financiar dhe fiskal’’,
dissertation thesis.
Roberti, M. 2002. Il nuovo diritto penale societario, artikull i botuar në Revistën Juridike Diritto & Diritti.
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Ujkani, M., R. Shkurt, S. Dhamos. 2013. “Accounting developments after transition in Albania”;
Konferencë Ndërkombëtare “III International Conference On Luca Pacioli In Accounting
History, III Balkans And Middle East Countries Conference On Accounting and Accounting
History’ Istanbul-Turkey, June 2013.
Ujkani, M., S. Dhamo. 2013. “Zbatimi i standardeve të kontabilitetit raportimi financiar dhe tatimor në
shqipëri” teme dizertacioni.
KKK. 2011. “Zhvillimi i Standardeve të Kontabilitetit në Shqipëri”
Ujkani, M, A. Kotorri, R. Perri. 2014 “Relationship between financial and tax reporting in Albania”,
ICRAE Shkoder.
Xhafa, H., B. Ciceri. 2001. Drejtimi Financiar, Botimet Toena, Tiranë.
www.kkk.gov.al
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Reporting and Auditing of Financial and Non-Financial Information in the Frame of
Corporate Sustainability / Prof. Dr. Nalan AKDOĞAN - Asspoc.Prof. Dr. S. Serap
YANIK
Prof. Dr. Nalan AKDOĞAN
Asspoc.Prof. Dr. S. Serap YANIK
Abstract
The aim of this study is to examine the reports which involves Financial and non-financial
information, in the context of transparency and accountability to demonstrate how business
management is achieving institutional sustainability by emphasizing the importance of corporate
sustainability and to explain the audit standards to be applied in the execution of audit processes to
ensure the correctness of such information. Historical financial information is disclosed to the public
via audited financial statements, while financial information about the future or information about the
non-financial past and future is included in the "Corporate Governance Principles Compliance
Report," "Social Sustainability Report, "Public reports are published through the Integrated Reports.
Auditing standards for auditing 3000, 3400, 3410, 3420 issued by the International Auditing and
Assurance Standards Board (IASB) - 3000, 3400, 3410, 3420, which are published for the purpose of
auditing non-historical information, which explain the principles to be applied in the control of non-
Studied in this study.
Corporate Sustainability is the adaptation of economic, environmental and social factors to corporate
activities and decision processes along with corporate governance principles in order to create long
term value in organizations and to manage the risks that may arise in these issues. Companies have
economic, social and environmental responsibilities as well as financial responsibilities. Corporate
sustainability is a business concept that creates benefits for all stakeholders by creating long-term
corporate value by managing risks arising from economic, social and environmental considerations.
Applying corporate governance principles should ensure that all of these are taken into account as a
whole and incorporated into decision processes for an accurate sustainability strategy. Sustainability at
work depends on adapting to cyclical changes, assessing benefits, measuring risks, and responding to
risks to be able to exist in the future. Sustainability is one of the goals of modern management theory,
with the development of risk management strategies that will further improve the company's current
situation and position, provide growth and reduce risks to a minimum.
Başkent University Faculty of Commercial Sciences, [email protected] Gazi University, Faculty of Economics and Administrative Sciences, [email protected]
96
Today, it is accepted that companies are not only sufficient to obtain financial success by producing
and selling goods and services, they are also good corporate citizens who are sensitive to the
environment and humanity, and that they can become good corporate governance practices. (Borsa
Istanbul-Sustainability Guideline) Corporate social responsibility is recognized as contributing to
economic development in the context of economic, social and environmental sustainability.
Sustainable development now requires consideration of the social and environmental dimensions as
well as the financial perspective. It is recognized that it is an ethical requirement for managers to be
responsive to society's needs and demands that the responsibilities of the Company's managers are not
limited solely to their own interests or to the interests of their shareholders. In the traditional
management approach, while the management of the company only accounts for the shareholders of
the company; In the corporate sustainability approach, the scope of accountability has expanded. The
management of the company has to protect the interests of all stakeholders. Therefore, management
has an obligation to account for all stakeholders.
Management has a responsibility to protect the environment. The company must invest in
environmentally friendly, environmentally friendly, waste-free natural resources such as electricity
and water, invest in projects that are environmentally friendly, use materials that can transform, while
the company is willing to increase its profits by producing goods and services. In addition, they should
take into account the interests of the community, ensure the safety of the employee, and improve
working conditions. Companies should contribute to sustainable social and economic development
with their investments, goods and services they produce. The Brundtland Commission's report defined
sustainable development as "development which meets the needs of current generations without
compromising the ability of future generations to meet their own needs" (1987 UN definition made in
the Commission). Sustainable development contributes in two aspects to the development of
Corporate sustainability, shows which areas companies need to concentrate to achieve sustainable
development, and enables companies, governments and civil society to achieve a common goal of
achieving ecological, social and economic sustainability.
Corporate sustainability can also be classified as micro-level, corporate sustainability, financial
sustainability, compliance with corporate governance principles, sustainability in environment and
social development. The ability of companies to continue their activities is possible by ensuring the
assumption that they will continue their lives in the foreseeable future. Companies need to have
'sufficient financial strength' in order to be able to sustain and improve their business activities and to
be successful in the competitive arena. Sustainability of business operations depends on the ability of
the operator to keep pace with changing conditions. Having adequate financial strength is the most
important factor in the continuity of the business. In order for the business to continue its life, the
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capital that it has allocated to the business must protect its production power. The basic conditions for
the sustainability of the activities depend on the ability of the assets of the institution to innovate when
its economic life is completed, to adapt to the technological changes, to make new investments, the
adequacy of the operating capital and other financial structures. The information can be obtained from
published financial statements. However, information users also need non-financial information about
companies. When information is obtained, the information disclosed in the compliance report to the
corporate governance principles, the sustainability report and the integrated report is used.
In the compliance report to the corporate governance principles, the information that is prepared by the
Capital Markets Board and consists of twenty seven main headings related to the board of directors,
the shareholders who should take place as a separate section in the activity reports of all the stock
exchange companies - the public disclosure and transparency-stakeholders. With this information, the
level of compliance of the companies with the basic principles of transparency, accountability,
equality and social responsibility are evaluated. In order to disseminate and encourage corporate
governance practices, BİST Corporate Governance Index was established in 2007 within the Istanbul
Stock Exchange. Corporate Governance Index was calculated and the companies implementing
Corporate Governance Principles were included. Corporate governance ratios are calculated under
four headings (shareholders - 25% weight, air pollution and transparency - 25% weight, stakeholders -
15% weight and board - 35% weight) Levels. By the year 2017, there are forty-nine enterprises that
have been incorporated into the corporate governance index by adapting to corporate governance
principles in Turkey.
The sustainability report is a report on economic, environmental and social parameters. They are
reports on the economic, environmental and social impacts of the company's daily activities. The
organization that prepares this report discloses and evaluates its sustainability performance in a
balanced and reasonable manner. The report also includes any positive or negative contributions to the
company's stakeholders. These reports also clearly describe the sustainability strategies, projects and
management styles of the companies. In general, it is expected that the report will be of content and
quality to meet the information needs of all the key stakeholders of a company.
In this study, we present the world's leading reporting frameworks; Global Reporting Initiative (Global
Reporting Initiative, GRI) presented by G4, UNGC-the United Nations Global Compact prepared in
accordance with the Convention Progress Reporting (Communication on Progress, COP), the
International Integrated Reporting Council (International Integrated Reporting Council, IIRC)
prepared by the Integrated Reporting (Reporting Integrated IR) CDP (Carbon Disclosure Project,
CDP), CDP report has been prepared in accordance examined. A business partnership agreement
between Borsa Istanbul and Ethical Investment Research Services Limited (EIRIS) was signed in
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October 2013 to calculate the BIST Sustainability Index, which is based on the company's
performance in environmental, social and corporate governance issues. According to the agreement,
EIRIS will evaluate the companies taking into consideration the national sustainability criteria and
companies that exceed the thresholds in the "Index Selection Criteria" determined within the scope of
the studies conducted with EIRIS will be included in the index to be calculated by the Exchange. By
2015, the number of companies including index is forty-two. The main criteria EIRIS considers in the
valuation process are environment, biodiversity, climate change, human rights, the supply chain, the
structure of the board, aid, sponsorship, health and safety.
Integrated reports reflect the future value, risk and opportunities and strategy of the organization. The
strategy of the organization is briefly and concisely stated in integrated reports that provide a single
short report medium and long term information in the context of corporate governance, performance
and expectations and external environment. With integrated reporting, it is expected that the company
will share its long-term vision and strategy, while at the same time describing its current situation and
resources, its values, the ways it plans to implement it, and the way it will follow. Unlike other reports,
both retrospective information and forward-looking vision are shared. The framework was first
published at the end of 2013 and the Turkish version was published in 2014. Integrated reporting is a
process that brings together the financial and non-financial information of organizations with a single
rapport and ensures that the value they create over time is reported periodically, which requires
integration within a reporting framework aimed at using common standards. This is the first time in
Turkey that this year Year) has been given as an example by the company that made integrated
reporting.
The reliability of these reports must be ensured to ensure the quality of the information provided in the
integrated reports. This requires independent auditing and the development of auditing standards in
this respect. Financial statements; (ISAs) issued by the International Auditing and Assurance
Standards Board (IASB) (BDSs relating to the audit of historical information issued by the UPS in
Turkey). However, we are aware that non-financial information or information provided for the future
is not yet subject to mandatory audit under independent audit. This issue is being continued by the
IAASB. The assurance audit standards 3000, 3400, 3410, 3420, published for assurance of information
outside historical information, have been examined in this study.
Transition to integrated reporting increases confidence in the information published in these reports
through audit; Will enhance the quality of information presented to financial report users and will
bring a more holistic and productive approach to corporate reporting. It will strengthen the
accountability and manageability elements for a wide base of capital (financial capital, human capital,
natural capital, manufactured capital, intellectual capital, social capital). It will encourage the creation
of short, medium and long term value.
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Ensuring corporate sustainability; Increase the corporate reputation, save money in medium and long
term costs, enable new business opportunities to emerge, and have the ability to have qualified work
force. Innovative product and service development is ensured. It enables organizations to have a rising
brand value and also to benefit from various state incentives.
Financial sustainability, compliance with corporate governance principles, corporate sustainability,
business success. For this; Effective operation of internal control systems, effective operation of
internal audit units, early detection of risks and good response to risk response processes, utilization of
independent audit activities will increase confidence in the information in the reports produced. It
should not be forgotten that the road leading to transparency and accountability goes through
independent auditing.
Keywords: Financial Information, Non-Financial Information, Reporting, Sustainability
100
Comparison of Participation and Conventional Banks which are Operating in Turkey in
Terms of Sustainability / Assist. Prof. Dr. Utku ŞENDURUR - Assist. Prof. Dr. Fatma
TEMELLİ
Assist. Prof. Dr. Utku ŞENDURUR
Assist. Prof. Dr. Fatma TEMELLİ
Abstract
Introduction
Nowadays, due to conditions of competition, firms must oversee the interests of society to maintain their
presences. Today, firms are not only located with profitability, also located with their social responsibility
comprehensions. Lots of firms have been noticed that, responsibility and sustainability have become very
important factor in steady economies and interactive management with stakeholders gains power, reputation
and competitive edge to the firms (Senal & Ateş, 2012). These developments, has brought out the necessity
of a new reporting system instead of traditional reporting system which is not only shows the economic
outputs, also shows the social and environmental outputs. Although there is no obligation in accounting
standards, firms have started to explain some information which are related with their own social and
environmental operations in their annual reports. These reports, which provide very important information
to the stakeholders can be entitled differently like, non-financial reporting, social and environmental
reporting, corporate social responsibility reporting and sustainability reporting. (Çalışkan, 2012).
Despite banks’ environmental operations are less than production firms at the present time, because of being
big firms, paying attention to social operations and having more stakeholder, banks have attached importance
to sustainability reporting. In this study, conventional banks and participation banks, which have become an
alternative banking model in Turkey of late years, will be compared in terms of sustainability.
Purpose and Importance of the Study
In this study the annual reports of conventional banks and participation banks which are operating in Turkey
in 2016 will be examined in detailed. Purpose of the study is, to compare the findings in terms of
conventional banks and participation banks. There are three research question in this study (Suttipun, 2012):
1. Due to annual reports, is there a bank doing sustainability reporting in Turkey?
2. Which variables can effect sustainability reporting?
3. What are the differences between conventional banks and participation banks in terms of
sustainability which are operating in Turkey?
Ağrı İbrahim Çeçen Üniversitesi İİBF İşletme Bölümü, [email protected]
Ağrı İbrahim Çeçen Üniversitesi İİBF İşletme Bölümü, [email protected]
101
There are lots of study in the literature related with comparison of conventional banks and participation
banks but no study related with comparison of conventional banks and participation banks in terms of
sustainability. This study can be seen important to fill this gap in the literature. Also this study contribute to
literature by knowing about if there is a bank doing sustainability reporting in Turkey, variables that effects
sustainability reporting and the differences between conventional banks and participation banks in terms of
sustainability which are operating in Turkey.
Methodology
There will be used 7 independent variables in this study, which were used most in literature (Suttipun, 2012).
These are size, country of origin, auditor type, leverage ratio, liquidity, profitability and age. In table 1 there
some explanations of variables.
Table 1. Independent Variables
Size Market value of bank (million TL)
Country of Origin Banks have divided as national and international
banks in this variable(Suttipun, 2012). The banks
called international banks are established in
overseas and have premises in Turkey. The banks
called national banks are both established in Turkey
and have premises in Turkey.
Auditor Type As is known there are four big auditing firm on the
World. These are Deloitte, KPMG,
PricewaterhouseCoopers and Ernst and Young. In
this study banks have divided as firms which are
auditing by these four big auditing firms or not.
Leverage Ratio Debt/equity
Liquidity Current assets/current liabilities
Profitability Net profit (Million TL)
Age How many years passed since the banks date of
foundation
Dependent variable of this study is sustainability scores. Sustainability scores are categorized in two as social
scores and environmental scores. There will be done scoring of two categories due to seven criteria by
looking at firms annual reports.
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The criterias which needed to calculate banks sustainability scores have been determined by examining
former studies (Suttipun, 2012; Ho & Taylor, 2007; Slaper & Hall, 2011) and Global Reporting
Initiative(GRI) 4 “Sustainability Reporting Guide”. There are 14 different ciriterias. 7 of them are social
criterias, 7 of them are environmental criterias. Total scores which will be obtained from this criterias will
give us sustainability score. These 14 criterias which are needed to calculate sustainability score are
compatible with former studies (Ho & Taylor, 2007; Suttipun, 2012).
Sustainability scoring system is based on a scoring system which takes place in “United Nations
Environment Programme Sustainability Criterias” (UNEP/SustainAbility, 1996). Jones and Alabaster (1999)
specified in their studies that, it is the most reliable scoring system. In this scoring system, it is given scores
to firms between 0-4 due to their annual reports. 0 point means, no explanation about this criteria; 4 point
means there is a detailed explanation also referring to sustainability. But, some of the criterias in this study
do not allow for quinery scoring system. For example, criterias like contact person or corporate social
responsibility, there will be binary scoring. If bank gives the contact person, score will be 1, if not, score will
be 0.
In this study it will be examined the relationship between conventional banks and participation banks’
sustainability scores which are operating in Turkey and some of the variables by using firms annual reports.
Furthermore, it will be examined if there is a significant difference between variables group and
conventional banks and participation banks group by the help of t-test and ANOVA.
Keywords: Sustainability, Conventional Banks, Participation Banks
103
Audit Firms’ Adoption Level of Cloud Computing: A Qualitative Research in Antalya /
Ayşegül CİĞER - Bülent KINAY
Ayşegül CİĞER
Bülent KINAY
Abstarct
The rapid spread of the internet and mobile technologies in recent times has led to cloud computing
becoming a prominent application in information technologies. Cloud computing affects the way
businesses do business significantly, and the effect continues to increase day by day.
Audit firms also use cloud computing to carry out audit activities from anywhere with internet access,
increase audit quality, provide detailed audit, create opportunities for real-time audit, provide
competitive advantage and alleviate the burden of customers in preparing and delivering data.
The aim of the study is to measure the level of adoption of cloud computing by audit firms in Antalya
and examine audit firms’ perceptions of the reasons why audit firms do or do not adopt cloud
computing. Semi-structured interview technique was used as qualitative research types as data
collection method in the research. Accordingly, an in-depth interview was conducted with 6 of 8 audit
firms authorized in the Public Oversight Authority in Antalya, according to their availability. As a
result of the study, audit firms' reasons for choosing cloud computing applications revealed in the data
backup security and the sending of large files. Data security and privacy concerns and lack of
knowledge about cloud system are factors that stand out in firms' reasons of not choosing. On the other
hand, all firms use Microsoft excel in audit activities; audit firms that provide sworn financial
consultancy services use general software programs; only independent audit firms use special software
programs.
Key Words: Cloud Computing, Auditing, Audit Firms
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ALSAI Challenges Towards Auditing for a Sustainable Development / Prof. Dr. Jorgji
BOLLANO
Prof. Dr. Jorgji BOLLANO
Abstract
Sustainable development was mention for the first time in the report of the World Economic and
Environmental Commission 1987. This concept integrates the economic, social and environmental
dimension in building a country's development objectives and strategies.
Sustainable development guarantees the well-being of the present society without compromising the
development opportunities of the future generations18
. All the government policies or activities of
society should bring the development and improvement of the three dimensions. No development
plans can be established for one dimension if this affects the two other dimensions. Also, the
development should not be considered as a credit or asset of a generation, everything must be seen as
the function of the sustainable continuity.
In drafting a country's development strategies, of course, the national context takes priority. But that is
not enough and moreover it is not fair for each of the dimensions. The economy today is moving
towards globalization, technologies have brought the societies closer to each other, while the
environment is the asset of all the humanity. As mentioned above, sustainable development strategies
require comprehensive nations' agreement on achieving some global indicators, and then these
strategies are associate with national action plans.
Implementing strategies that are based on sustainable development does not refer to the absolute
fanaticism in the inviolability of non-renewable resources but on balanced management and finding
new advanced technologies to support the economy and social development about renewable
resources. Governments have a key role to play in promoting sustainable development. Government
instruments to promote sustainable development are numerous such as fiscal policies that are used as
incentives or discouraging in the various sectors of the economy; Legislation that allows or hinders
certain behavior in the economy, social and environmental dimensions; Budget expenditures that
create the necessary equilibrium of simultaneous development of the three dimensions.
Chairman of the National Accounting Council, [email protected]
81 INTOSAI Working Group on Environmental Auditing
105
What is the role of the audit in the context of sustainable development? More than the task this is a
responsibility to conduct audits for whole process such as auditing the development of program
proposals, their implementation, and then monitoring the performance indicators and resource control.
Auditing responsibility remains the oversight of balanced integration into the three-dimensional
development programs. Auditors are not responsible for policy making but for their audit, even to the
extent that the Government has implemented such principles and policies.
The audit in our country is in time to consider another aspect of the audit. While ALSAI audits
Government programs and their implementation by governmental institutions and agencies, it also
needs to audit the environmental management standards that the Government applies. An
environmental management system is a cyclical process of planning, implementation, control, review
and continuous improvement. It is considered an achievement that in the new draft law on accounting
is presented a new section deriving from Dir 34/2013 / EU, section divided into several paragraphs,
where are provided clear requirements for profit-making entities on drafting not only financial
statements but also of some other non-financial reports. One of the paragraphs is stated: "Large
economic entities, which are of public interest and exceed the average 500 employees during the
reporting period, should include in their performance activity report a non-financial report, which
contains the necessary information for a better understanding of the entity's own development,
performance, position and impact of its activity in relation to the environment, social and employment
issues, respect for human rights, anti-corruption and issues of bribery ... " In drafting the work plan of
an audit, with the aim to promote the sustainable development, two elements should be considered:
• First and the most important, the selection and the audit plan with the aim to take in to
consideration the sustainable development;
• Second, integrating sustainable development issues into auditors' daily work, issues such as
procurement decisions, travel, accommodation, etc.
In the first part of the paper I will provide enough information gathered from primary and secondary
sources about theoretical and practical positions in favor of the main argument of the paper. The
second part will outline the methodology followed by searching, finding and analyzing data. In the
third part, the findings will be combined with conclusions and in the end will be given some
recommendations that aim the improvement of the audit process by the Supreme State Audit in our
country.
Keywords: Audit, Sustainable Development, Environment
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A Proposal of Integrated Report Pattern in a Company in the Scope of Sustainability /
Prof. Dr. Durmuş ACAR - Prof. Dr. Hayrettin USUL - Assist. Prof. Dr. Mahmut Sami
ÖZTÜRK
Prof. Dr. Durmuş ACAR
Prof. Dr. Hayrettin USUL
Assist. Prof. Dr. Mahmut Sami ÖZTÜRK
Abstract
As a requirement of corporate governance, companies must clarify all necessary information in a clear,
accurate and transparent format within the framework of transparency and accountability concepts.
Usually, companies report only financial information. They present financial information to
information users on financial statements. For information users, however, it is not sufficient to
provide only financial information. In order to have sufficient information about the company,
financial information as well as non-financial information needs to be presented.
In the face of the need for joint reporting of financial and non-financial information, the concept of
integrated reporting has emerged. In the integrated report, all information about the company is
included in one report as a whole. Therefore, information users can easily access all the information of
the company directly in a single report format. The integrated report also increases the overall
performance of the company. The integrated report also includes estimates and information about the
future situation of the company, not just the current situation. All data on the sustainability of
enterprises are presented in the integrated report. Not only economic and financial information, but
also sustainability risks and analyzes are presented. The report describes the risks and opportunities
that the company may face in the future and provides information about the strategies that the
company will implement. One of the most important issues in the integrated report is the
determination of the added value of the company to the community and the environment. The fact that
this added value is expressed in numbers may be much more descriptive.
The aim of this study is to provide a sample report format with respect to the integrated report that the
enterprises will form within the framework of the concept of sustainability. The integrated report
Mehmet Akif Ersoy University, Burdur, Turkey, [email protected] Katip Çelebi University, İzmir, Turkey, [email protected] Süleyman Demirel University, Isparta, Turkey, [email protected]
107
pattern was created on a production company. The report format proposed in the study is a guideline
for enterprises. Also in the study, what information will be included in the integrated report is
explained in detail.
The enterprise that is the subject of the study is carrying out its activities in the construction sector.
The shares of the company are traded on the stock exchange. The company is subject to the provisions
of the Capital Markets Board of Turkey. Therefore, it is also subject to independent auditing. The
financial statements of the company are published in Public Disclosure Platform. In addition, activity
reports are regularly presented to information users. However, the company does not publish an
integrated report currently. Therefore, in this study, information about the integrated report format and
how the integrated report can be constituted is given.
The integrated report to be formed will include, as general topics, the financial performance,
environmental performance and social performance of the company. In addition, in accordance with
sustainability, information will be provided on the future status of the company as a result of the
analysis.
The enterprise covered in the study is a manufacturing company operating in the construction sector.
The enterprise supplies some of the spare parts used in production with imports. Imports are usually
carried out in European Union countries. In addition, the company sells its products at home and
abroad. It is mostly exported to African countries and Turkish States. Therefore, the company
performs import and export activities intensively. According to the proposed integrated report
presented in the study, the political and economic situation in the countries that are made import and
export must be examined on a cyclical basis. How the results of the analysis carried out will influence
the future of the company will be indicated by the numbers in the report. By following the economic
systems in the countries, the changes that may occur in the systems should be predicted and the
strategy should be determined accordingly. All these economic and political reviews and the strategic
decisions that can be made must be presented to the stakeholders in the integrated report. Thus,
stakeholders will have a better idea of the future of the company.
Likewise, as a result of continuous monitoring of the economic situation of our country, the effects of
future economic expectations on the performance of the company should be shared with the
stakeholders in the integrated report. When examining the economic situation of our country, possible
war and confusion that may arise in the surrounding area should also be considered. In addition, legal
arrangements relating to the company in our country or in other countries and their effects should be
presented to the information users.
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In accordance with their social responsibilities, companies need to keep their sensitivity to the
environment at the highest level. Environmental information of the company should be included in the
integrated report. Some of the environmental issues that the company will report on the integrated
report are the amount of solid waste and how much it is removed, the level of toxic gas from the
factory chimney and etc. In addition, future environmental impacts and future environmental added
value of the company will be also presented in integrated report.
The information about the social performance and the social value added of the company will be
presented to the stakeholders under a separate heading. Detailed information about the company's
social responsibility projects will be disclosed. Furthermore, as a result of the numerical expression of
the social value added of the company, information users will be able to have a clear knowledge of the
social performance of the business.
As a result, it is determined in this study which information will be included in the integrated report.
Subsequently, a sample application is presented as a suggestion on how to present this information in a
single report format.
Keywords: Integrated Reporting, Sustainability, Social Responsibility, Environmental Performance,
Corporate Governance
109
Stakeholder Activism as a Form of Social Monitoring Mechanism for Sustainable
Business / Res. Ass. Melissa N. CAGLE - Prof. Dr. Cağnur K. BALSARI
Res. Ass. Melissa N. CAGLE
Prof. Dr. Cağnur K. BALSARI
Abstract
Even though businesses have been confronted by an almost continuous wave of organized stakeholder
activity over the last fifty years (O’Connell et al., 2005), increasing media coverage of issues such as
the corporate reporting scandals (Leuz, 2010); bankruptcies and broken promises (Harrison and Van
der Laan Smith, 2015); intensified competition (O’riordan and Fairbrass, 2008); and increasing
environmental concerns (Tanimoto and Suziki, 2005) have furthered the social movement and
motivated investor and stakeholder demand (Wills, 2003; Skouloudis et al., 2010) for better and
broader information under the decision making process (Leuz, 2010; Zyl, 2013; Kolk and Perego,
2010; Harrison and Van der Laan Smith, 2015). Organizations are now faced with the growing
monitoring of a wide range of groups19
in different corporate issues. Unless the organizations address
and balance the claims of these multiple stakeholders (Freeman and Evan, 1991), this can quickly
result in losing confidence in the firm's’ performance and stakeholder withdrawal (Wood, 1991; Wood
and Jones, 1995) which would in turn, threaten the business.
While most managers might see stakeholder requests as “mosquitoes buzzing in the ears of managers”
(Mitchell et al., 1997), stakeholders are now capable of coercing the business to act in particular ways
that may ultimately impact the firm's financial well-being, reputation and legitimacy (Vasi and King,
2012). Thus, managers are compelled to take part of stakeholder engagement and dialogue activities
and carefully consider the impact of adopting different policy practices. However, it must be pointed
out that the activism efforts employed by stakeholders [boycotts and demonstrations (Vasi and King,
2012); lawsuits and lobbying legislators (O’Connell et al., 2005); changes in state regulation (Vasi,
2009); coercive pressures (Vasi and King, 2012)] are not undertaken with the purpose of derailing the
operations of the organization, but to contribute to companies’ decisions process for sustainable
growth (Dhir, 2007). Because of their inability to gain access to critical decision-making forums inside
target companies (Vasi and King, 2012) these activist stakeholders develop their own ways to work
Corresponding Author: Dokuz Eylül University, Faculty of Business, Buca- Izmir, [email protected]
Dokuz Eylül University, Faculty of Business 91
Shareholders and legislators (Vasi and King, 2012); environmental organizations (Lenox and Eesley, 2009);
employees, local residents, suppliers and customers (O’Connell et al., 2005)..etc.
110
together with the managers and to perform social audit. In the end, organizations exist in environments
where their activities have positive or negative consequences (O’Connell et al., 2005) for the other
actors that comprise its environment and these actors [stakeholders] have their own views on how the
firm should operate- views that may or may not coincide with the profit goals of corporate leaders.
This highlights the need for clear communication between management and stakeholder regarding the
risks faced by the corporation along with their strategies (Zyl, 2013). However, research on
stakeholder influence and monitoring on corporate activities have not been explored much in the
literature.
This research aims to explore stakeholder-firm communication and the degree of stakeholder
monitoring on corporate decision-making by analyzing Corporate Social Responsibility (CSR)
Reports.
Analysis: Since organized stakeholder activity is an important concern that can seriously damage a
firm's financial well-being, reputation and legitimacy (Vasi and King, 2012), we propose analyzing the
pre-post CSR reports of firms that have been exposed to Stakeholder Activities. This creates a
motivation to analyze and explore the differences between these reports in terms of stakeholder
engagement focus. We expect firm’s engagement and communication approaches to increase during
ongoing negotiation/communication periods in their CSR reports.
By analyzing these reports we expect to identify the actions taken by firms when faced with
Stakeholder Activism and help shed light on the need for balancing the claims of multiple
stakeholders- before the issue becomes difficult to control.
In order to determine the sample for our analysis we will carefully search through a large number of
newspapers for relevant stories and articles concerning Stakeholder Activism examples. By employing
use of the extreme or deviant case sampling method (Patton, 1990) we collect examples of cases until
the pre-post report analysis reaches saturation (Nastasi, 1999) and the findings begin repeating.
Implications: By analysing actions of firms in response to stakeholder activism we hope to contribute
to the literature by providing evidence on the results of stakeholder monitoring. To the best of our
knowledge, a limited number of studies have been conducted on the stakeholder and managerial
perception (Dierkes and Antal, 1986; Ruf et al., 2001) regarding the level of disclosure. This study
will be taking a different approach by considering stakeholder communication and monitoring.
Keywords: Stakeholder Activism, Social Monitoring
111
References
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study”, Corporate Social Responsibility and Environmental Management, 19(6), 355-363.
Crane, A. and S. Livesey. 2003. “Are you talking to me? Stakeholder communication and the risks and
rewards of dialogue”, in Andriof, J., Waddock, S., Husted, B. and Rahman, S. (Eds),
Unfolding Stakeholder Thinking 2, Greenleaf Publishing, Sheffield, pp. 39-52.
Cheung, A. W. K. 2011. “Do stock investors value corporate sustainability? Evidence from an event
study”, Journal of Business Ethics, 99(2), 145-165.
Dierkes, M., & A. B. Antal. 1986. “Whither corporate social reporting: Is it time to legislate?”,
California Management Review, 28(3), 106-121.
Dubbink, W., J. Graafland & L. Van Liedekerke. 2008. “CSR, transparency and the role of
intermediate organisations”, Journal of Business Ethics, 82(2), 391-406.
Dhir, K. S. 2007. “Stakeholder activism through nonviolence”, Corporate Communications: An
International Journal, 12(1), 75-93.
Freeman, R. E., & W. M. Evan. 1991. “Corporate governance: A stakeholder interpretation”, Journal
of Behavioral Economics, 19(4), 337-359.
Gao, S. and J. Zhang. 2001. “A comparative study of stakeholder engagement approaches in social
auditing”, in Andriof, J. and McIntosh, M. (Eds), Perspectives on Corporate Citizenship,
Greenleaf Publishing, Sheffield, pp. 239-55
Global Reporting Initiative. 2010. GRI and ISO 26000: How to use the GRI guidelines in conjunction
with ISO 26000. Aufl. Amsterdam.
Global Reporting Initiative. 2015. About GRI. https://www.globalreporting.org/Pages/default.aspx
(31.05.15)
Hedberg, C. J., & F. Von Malmborg. 2003. “The Global Reporting Initiative and corporate
sustainability reporting in Swedish companies”, Corporate social responsibility and
environmental management, 10(3), 153-164.
Harrison, J. S., & J. Van der Laan Smith. 2015. “Responsible accounting for stakeholders”, Journal of
Management Studies, 52(7), 935-960.
Kolk, A., & P. Perego. 2010. “Determinants of the adoption of sustainability assurance statements: An
international investigation”, Business Strategy and the Environment, 19(3), 182-198.
Levy, D. L., M. Alvesson & H. Willmott. 2003. Critical Approaches to Strategic Management.
Leuz, C. 2010. “Different approaches to corporate reporting regulation: How jurisdictions differ and
why”, Accounting and Business Research, 40(3), 229-256.
Lenox, M. J., & C. E. Eesley. 2009. “Private environmental activism and the selection and response of
firm targets”, Journal of Economics & Management Strategy, 18(1), 45-73.
112
Manetti, G. 2011. “The quality of stakeholder engagement in sustainability reporting: empirical
evidence and critical points”, Corporate Social Responsibility and Environmental
Management, 18(2), 110-122.
Mitchell, R. K., B. R. Agle & D. J. Wood. 1997. “Toward a theory of stakeholder identification and
salience: Defining the principle of who and what really counts”, Academy of Management
Review, 22(4), 853-886.
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O’Connell, L. L., C. U. Stephens, M. Betz, J. M. Shepard & J. R. Hendry. 2005. “An organizational
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Quarterly, 15(01), 93-111.
Patton, M. Q. 1990. Qualitative evaluation and research methods . SAGE Publications, inc.
Ruf, B. M., K. Muralidhar, R. M. Brown, J. J. Janney & K. Paul. 2001. “An empirical investigation of
the relationship between change in corporate social performance and financial performance: A
stakeholder theory perspective”, Journal of Business Ethics, 32(2), 143-156.
Sandelowski, M. 1995. “Sample size in qualitative research”, Research in Nursing & Health, 18(2),
179-183.
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Production, 18(5), 426-438.
Tanimoto, K., & K. Suzuki. 2005. “Corporate Social Responsibility in Japan: Analyzing the
participating companies in global reporting initiative”, European Institute of Japanese Studies.
Vasi, I. B. 2009. “New heroes, old theories? Toward a sociological perspective on social
entrepreneurship”, An Introduction to Social Entrepreneurship, 155-173.
Vasi, I. B., & B. G. King. 2012. “Social movements, risk perceptions, and economic outcomes the
effect of primary and secondary stakeholder activism on firms’ perceived environmental risk
and financial performance”, American Sociological Review, 77(4), 573-596.
Willis, A. 2003. “The role of the global reporting initiative's sustainability reporting guidelines in the
social screening of investments”, Journal of Business Ethics, 43(3), 233-237.
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691-718.
113
Wood, D. J., & R. E. Jones. 1995. “Stakeholder mismatching: A theoretical problem in empirical
research on corporate social performance”, The International Journal of Organizational
Analysis, 3(3), 229-267.
Zöller, K. 1999. “Growing credibility through dialogue: Experiences in Germany and the USA”,
In Greener Marketing: A Global Perspective on Greening Marketing Practice. Vol. 196, No.
206, pp. 196-206).
Zyl, A. S. V. 2013. “The importance of stakeholder engagement in managing corporate reputations”,
International Journal of Innovation and Sustainable Development, 7(1), 46-60.
114
Integrated Reporting and Social Auditing Concept / Erkan ÖZTÜRK - Ömer Faruk
GÜLEÇ
Erkan ÖZTÜRK
Ömer Faruk GÜLEÇ
Abstract
Introduction
Sustainability has received much attention for the end of the 20th century in all over the world. After
the Brundtland report published by the United Nations World Commission on Environment and
Development in 1987, the concept of stakeholder has become much more important for sustainability
activities (Tarakcıoğlu, 2016: 51). The stakeholder concept refers to the parties that deal not only with
the financial results of the business but also with the social and environmental consequences of
business operations. Since the stakeholders demand more information on companies’ non-financial
performance, reporting on environmental, social and governmental subjects has become more essential
to eliminate the uncertainties faced by the companies. Integrated reporting which is a new type of
reporting for the accounting literature is accepted as a reporting approach that can present both the
financial and non-financial implications of firms’ activities to both shareholders and stakeholders in an
objective manner (Karğın et al., 2013: 31). Integrated reporting is the result of the need for better
disclosing of social and environmental issues in addition to economic activities (Aydın 2015, 63). This
reporting format has first recognized with the sustainability, social responsibility and corporate social
responsibility report formats and presented as a single report with the financial results as well.
(Gençoğlu ve Aytaç, 2016: 53).
Integrated Reporting in Turkey
Due to the increased awareness of integrated reporting in Turkey in recent years, "Integrated
Reporting Turkish Network" (ERTA) started its activities on 15.02.2017. The aim of ERTA
(Integrated Reporting Network Turkey) is to raise awareness on integrated reporting and integrated
thinking throughout Turkey, to enhance the capacity of businesses and to ensure that good practices
are shared. Integrated reporting has emerged as a need to assess not only past financial information but
also information on possible risks and opportunities that may arise in the future regarding business
operations (Kaya, 2015: 115).
115
Integrated reporting dates back to the appointment of Mervyn King by Nelson Mandela in 1994 to
establish the King Committee in order to encourage transparency and information sharing, and to
alleviate the lack of confidence in South African institutions (ERTA website). In 2010, the
International Integrated Reporting Council (IIRC) was established and in 2011 the first draft of
integrated reporting was published. The "Integrated Reporting Framework Draft" was published in
2012 as a result of feedbacks received in the following period. On April 16, 2013, the "Integrated
Reporting Framework" was published inspired by the previously published draft. Although there is no
legal obligation to implement the framework, firms that want to prepare integrated reporting refer to
this standard format which basically has two sections called guidelines and content items. While
guidelines provide information about the content of an integrated report, content items establish links
between information provided under guidelines (Gençoğlu ve Aytaç, 2016: 56).
Audit of Integrated Reporting
Since integrated reporting describes the financial results, non-financial results and the relationship
between these dynamics, the audit of integrated reports should be done with an "integrated audit"
approach (Eccless, 2011: 1). There are some international principles to audit integrated reporting such
as International Standard on Assurance Engagements (ISAE) 3000 published by International
Federation of Accountants (IFAC) and ISA 720 which is international standard on auditing. Many
countries have adopted these standards and started to legal studies on the audit of integrated reports. In
Turkey, the ISA720 standard was translated into Turkish by the Public Oversight, Accounting and
Auditing Standards Authority and published in the Official Gazette dated March 14, 2014 and
numbered 28941 in the name of BDS720 Independent Auditing Standard. However, lack of
established principles for the audit of non-financial information makes it difficult to carry out
integrated auditing. It might be possible to develop new methods by using the concept of "social
auditing" when auditing non-financial sections of integrated reports. Since social responsibility has
become more important in recent years, it is an inevitable need to audit and report on the social
impacts of firms’ operations.
Social Auditing
The audit of non-financial information which is the social auditing concept was first handled by
Howard R. Bowen in the 1953. Social auditing is defined as follows. Social auditing is a systematic
review that evaluates the performance of a firm from the socio-economic perspective (Koontz ve
Weinrich, 1988: 611). It is a process that observes and reports the social impacts and consequences of
the activities of the firms. Because of the globalization and the differentiation of community needs and
wants, the process of present and audit of non-financial information has been a vital issue for the
stakeholders. Therefore, social auditing might aid to assess the quality of information with the
116
different techniques. Social auditing suggests a multidimensional approach which is superior to
traditional methods that only focus on financial information (Labat ve Anderson, 1997: 4). Bendell
(2001) offers that social audit has a different methodological approach than traditional financial audits.
While the financial auditor primarily looks at hard facts like numbers produced by accounting systems
social auditors investigate more non-financial and qualitative areas through including all stakeholders.
Social auditing refers to the social responsibility, accountability and sustainability concepts that
includes the continuous development of firms regarding environment, ethics, supplier relations,
shareholder relations or social aids and contributions (Baruönü, 2005). Although the scope of social
auditing varies to the different authors, it generally includes the following items:
- Community relationships and development programs
- Relations with employees, customers, shareholders and governments
- Employee safety and health
- Social aid and contributions
- Employment of groups to be protected
- Possible social effects of new technological developments Plunkett and Attner (1997) and Spear
(1997).
There are various methods to measure the success of the firms in their social responsibilities;
- Stakeholders audit
- Security audit
- Environmental audit
- Self-audit of firms
- Audit through laws
- Audit of social performance and selected group attitudes
- Social balance sheet and income statement Miner et al. (1985) and Bovee et al. (1993).
In addition to these methods, firms also improve their social auditing practices through conducting
unannounced visits, enhancing the worker interviews; implementation of complaints system, involving
local stakeholders and effective follow-up processes (Björkman and Wong, 2013). The success in the
field of social auditing will undoubtedly reflect to the financial results of the firms in various ways.
For example, the popularity and the reputation of the firms through social practices might aid to
increase stock prices and to decrease the cost of borrowing (Akgemici et al, 2001). In addition, firms
might expect more qualified workforce and healthier relations with suppliers and shareholders.
However, since social auditing practices are a time consuming and a costly process, there are still
some major issues to implement this concept in the firms effectively.
Keywords: Social Auditing, Integrated Reporting, Stakeholders
117
References
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Çözüm Dergisi, Sayı: 130, s. 61 – 72.
Akgemci, T., A. Çelik and Ş. Özgener. 2001. “Sosyal Denetim Kavramına Genel bir Yaklaşım
(Değerlendirme)”, İstanbul Üniversitesi Siyasal Bilgiler Fakültesi Dergisi 23-24.
Baruönü, F. Ö. 2005. “Sosyal Denetim ve Türkiye Uygulaması”, Unpublished Master Thesis,
Hacettepe Üniversitesi.
Bendell, J. 2001. “Towards participatory workplace appraisal: Report from a focus group of women
banana workers”. Occasional Paper, New Academy of Business.
Björkman, H. and E. Wong. 2013. “The Role of Social Auditors; A Categorization of the Unknown”,
Unpublished Master Thesis, Uppsala University.
Bovee, C. L., J. W. Thill, M. B Wood and G. P. Pavel. 1993. Management, New York: McGraw-Hill
Inc.
Eccles, R. and D. Saltzman. 2011. “Achieving Sustainability Through Integrated Reporting”, Stanford
Social Innovation Review, pp. 56 – 61.
Gençoğlu, Ü. G. and A. Aytaç. 2016. “Kurumsal Sürdürülebilirlik Açısından Entegre Raporlamanın
Önemi ve BIST Uygulamaları”, Muhasebe ve Finansman Dergisi, Sayı: 72, s. 51 – 66.
Karğın, S., H. Aracı and H. Aktaş. 2013. “Entegre Raporlama: Yeni Bir Raporlama Perspektifi”,
Muhasebe ve Vergi Uygulamaları Dergisi (MUVU), Cilt: 6, Sayı: 1, s. 27 – 46.
Kaya, P. 2015. “Entegre Raporlama Sisteminin Ortaya Çıkış Sebepleri ve Şirketlere Sağlayacağı
Faydalar”, Muhasebe ve Denetime Bakış, Cilt: 15, Sayı: 45, s. 113 – 130.
Koontz, H., H. Weihrich. 1988. Management, New York: McGraw- Hill Book Company, Ninth
Edition.
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E. Merril Publishing.
Oprisor, T. 2015. “Auditing Integrated Reports: Are There Solutions to This Puzzle?”, Procedia
Economics and Finance, Vol: 25, pp. 87 – 95.
Plunkett, W. R. and F. A. Raymond. 1997. Management, Ohio: South-Westhern College Publishing.
Spear, R. 1997. “Social Audit and the Social Economy: Approaches and Issues”, CRU, Open
University, Milton Keynes, UK, http://www.ny.airnet.nejp/ccij/spearze.html
Tarakcıoğlu, A. A. 2016. “Entegre Raporlama ve Sürdürülebilirlik Muhasebesi”, Süleyman Demirel
Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, Cilt: 3, Sayı: 25, s. 47 – 64.
http://www.entegreraporlamatr.org/en/integrated-reporting/what-is-integrated-reporting.aspx ,
Access Date: 28/05/2017, 15:20
118
Enhancing the Performance of Projects with Foreign Funding / Ina SOKOLI
Ina SOKOLI
Abstract
In recent years, Albania has had high levels of public investment, some of which are provided with
funding from international organizations and foreign states. Projects with foreign funding are mainly
focused on the government's strategic priority for securing infrastructure in sectors such as transport,
electricity and water supply, which constitute the basis and the impetus for economic growth and poverty
reduction. In recent three years where spent 71 billion ALL annually, of which foreign financing occupy
between 39% in 2011 and 2012, and increased to 64% of total 2015 budget, ie almost doubled compared
to capital expenditure sources internal financing. In other words, planned budget revenues for 2015 reach
to cover current budget spending and contribute only 1.8% to capital expenditure financing.
But this sort of trend of increasing foreign investment funds, can not endure for many factors, but mainly
due to the worldwide financial crisis, as well as receipt of these funds with interest at market level. Under
these conditions, one of the current and future challenges remains to use effectively and efficiently the
resources available to public investment.
The Albanian Government in all cases ratifies specific laws on donor-related agreements in the form of
loans or subsidies from non-public institutions and bodies, and not directly or indirectly by foreign
investors.
For the period 2014-2015, the multilateral donors are the European Commission with 22% of total
support, 20% Islamic Development Bank, 14% World Bank and 10% European Bank for Reconstruction
and Development, followed by the European Investment Bank 7% , While the largest bilateral donors are
Germany 7%, Italy 6.2%, Austria 5.7% followed by Sweden, Saudi Development Fund etc.
Approximately 300-400 million euros are disbursed per year for projects under implementation from
loans and grants, and in the last two years 22 new projects have been launched. Increasing the
effectiveness of investments in projects with foreign funding requires an accurate and comprehensive
feasibility studies, with the participation of all economic and social actors, and coordinated with the
necessary estimates of time, form and possibility return of the investment, "translated" into measurable
Auditor, AL-SAI
119
quantitativ or qualitative and notable indicators. Only with this prudence, foreign-funded projects, allows
the availability of funding in the right amount and time, in accordance with the economic development
objectives, positively influencing the increase of decision making flexibility and improving the
effectiveness of the aviation.
The effectiveness of foreign funding is also determined by the time between the study, the design, the
drafting of the agreement and the beginning of the implementation of these projects. The experience so
far has shown that there is a long period of time, diminishing their final benefit. In addition, within the
project itself, a better balance must be found between capital and operating costs in favor of the
foreground, and aiming for their orientation towards projects that expand the productive capacities of the
economy, improve its productivity, ability to compare and employment opportunities. In this way, it is
best served by the sustainable development of the economy.
Even if the project goes well until the start-up, there are few cases when the oversight activity of the
particular entities is deficient, affecting the quality and timing of the project's execution by the contractor,
falling into a silent agreement between them. This requires, first of all, strict monitoring by the
employees of implementing units and should be accountable that the benefits of the community, as well
as the borrowed and paid debt, depend on their activity. Depending on the professional capacities of
project implementation units and public institutions in reporting on foreign funding, there is a
discrepancy between donor and public institution figures.
Theoretical Basis
The word "Investment" comes from Latin "vestis", meaning clothing, and refers to the act of putting
things (money or other resources) into the "pockets of others." The term "investment" is used in different
ways in Economists and the finance sector, economists refer to a real investment (such as a car, a house,
etc.), while financiers refer to a financial asset such as money placed in a bank or the market and which
can be used to buy a fortune or realize a project.
Investing in general is putting money into an object with the hope of gaining.
More specifically: the investment is the engagement of money or capital for the purchase of financial
instruments or other assets in order to have profitable returns in the form of interest, income (dividends),
or instrument rating. An investment involves selecting from an individual or organization that after some
analysis and studies decides to borrow money in an instrument such as assets, commodities, stocks,
bonds, financial derivatives, etc. that have a certain level of risk and at the same time offers the
possibility of generating returns over a given period of time.
120
Methodology
Following the literature review, research will first be based on a comparative analysis of the main
performance indicators of foreign-funded projects in Albania to detect similarities and changes. A
performance-driven performance model will be developed to highlight the factors that have a high impact
on performance enhancement, the conclusions that can be used to measure ongoing project performance.
An empirical model will be developed to determine the impact of service quality, time, quality of
supervision, and effectiveness management by using aggregate and individual data. These data will be
provided by the audit reports of projects by the High State Audit. To assess the performance of projects,
we will evaluate the efficiency, efficiency and efficiency of each project.
Purpose of the Study
The purpose of the paper is to study the performance of foreign-funded projects. The main emphasis will
be on increasing the effectiveness of projects, because in recent years, Albania has had a high level of
public investment and some of it is provided by international organizations' funding. Increasing their
performance is very important as they face very high costs.
Objectives of the Research Project
The work will be accomplished through the achievement of the following objectives:
• Identifying factors that affect the performance of projects with foreign funding
• Identifying the link between these factors and the degree of their impact on performance
• Comparison of the performance of these projects with the potential and the set objectives of the
projects.
Keywords: Performance of Projects, Foreign Funding
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121
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122
Lending in Foreign Markets / Lirida CAKU
Lirida CAKU10
Abstract
This paper intends to present a proper study of lending in first foreign markets in the view of banks as
well as in multinational companies. We will see the reasons why multinationals consider foreign
financing more than domestic. We will also analyze the banking sector’s position in Albania against non-
residents. What is seen is that banking sector’s relationship with non-resident entitles appears to be stable
and its credit position has increased.
The measures taken by the Bank of Albania during the recent years have contributed to the reduction of
the growth rate of banking sector investments with non-resident entitles. In general, non-resident credit is
oriented to long-term maturity, with the main weight in the medium term (52%). In the other aspect, it is
noticed that the Albanian Investors, mainly businesses, are increasingly interested in investing abroad.
At the end of the paper some concrete examples are provided by funding sources across countries.
Following the study of Foreign Direct Investments in our country, the idea of a study on lending in
foreign markets was born. There has been a study in the banking sector in Albania where statistics are
provided over the years how banks in Albania fund non-resident entities.
Analysis and progress on how this financing process has continued over the years. In this paper we will
also focus on the facilities offered by the Albanian State in Foreign Investments in our country. The
purpose of this paper is to highlight the reasons why many individuals, but always business in Albania,
prefer to make investments abroad, the facilities and obstacles they face in the country of expectation, the
results from the expectations they have.
We will try to reach some concrete and concrete conclusions and recommendations that need to be
considered in the future so that the current regime of settlement in Albania is improved, obviously
through measures taken by the Albanian state.
10
American Bank of Investments S.a: [email protected]
123
The paper will be based mainly on the data published by the Bank of Albania on analyzes and studies
with the position and position of non-residents in the banking sector, their credit performance by the
bank.
We will also look at the main reasons why many domestic companies prefer to make large investments
abroad. The main reasons why the multinational companies consider the foreign financing which are:
• Low interest rates,
• Expectations for the exchange rate and
• Expectations for the exchange rate.
We will present the banking sector's position in Albania on non-residents and Will be analyzed Credit
risk in lending to individuals and to business also. Albanian Legislation regarding domestic and foreign
financing measures, and finally some Case of foreign financing between the two countries.
Foreign Direct Investments have a positive impact on the economic growth of a country. So the higher
the foreign direct investment the higher the economic growth of a country, but the higher the economic
growth, the higher the foreign direct investment will be.
Against this background, the predictability of the investment regime needs to be improved. The current
investment regime is regulated by many legal framework laws and sectoral laws, which need to create a
unified regulatory regime to attract more investment.
Borrowers tend to seek loans from creditors in these countries precisely because of low interest rates. A
country with relatively low interest rates is often expected to have a low level of inflation, which
increases the value of the foreign currency by eliminating the advantage of lower interest rates.
When a foreign affiliate of a US-based multinational corporation repatriates funds to the parent company,
it has to convert them into dollars, thereby exposing the risk of exchange rates. The multinational
corporation will be negatively affected if the foreign currency is depreciated at repatriation time.
Provide an appropriate legal and regulatory framework for the sector through the improvement and
modernization of the legal framework for investments in line with international best practices and the
promotion and promotion of the development and application of good international standards and
practices.
Funding in foreign currencies has become commonplace as a result of the development of the European
currency market. The financing cost may vary according to the currencies that are borrowed within the
European currency market.
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Specifically, during the year 2016, small and medium-sized businesses continued to increase the share of
short-term loans, while the large business is oriented towards mid-term loans and does not record
changes in the long-term weight.
In the end we can say that the banking sector remains the main segment of financial intermediation in
Albania. Regarding the banking system, the Bank of Albania considers very important the revival of
some institutions, whose activity constitutes a part of the banking market.
The presence of foreign banks in the country brings about improvements by promoting the application of
international standards of accounting, reporting and control, which affects the performance of banks as
well as the central bank
Keywords: Investment, Loans, Banking Sector, Non-Resident, Multinational Society
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Being A Good Auditor / Jonida MUKA
Jonida MUKA
Abstract
As it is known the audition is a very complex and difficult process and in order to complete all its
challenges and requirements there are required highly prepared and qualified employees. This writing
intends to inform the readers about the qualities, abilities, qualifications, that should or must have and the
criteria that should match an internal auditor to be a successful one. At the first part of the text it is
explained that there are a lot of qualities and professional skills that a successful auditor should hold or
master, and all these can be classified in personal qualities, professional abilities, required qualifications
and preferred certifications. Additionally all these points are elaborated giving a complete idea about
every topic mentioned above; starting from the also-called 'subjective’ sides like personality qualities and
virtues, communication skills, mentioning the required qualifications based on The provisions of the
Labor Code of the Republic of Albania, and also some international preferred certifications up to sharing
responsibilities in hierarchical scale. It is hoped that this writing will inform the readers about what it
takes to be a good auditor in order to successfully complete the complex process of audition.
Introduction
The Auditors are specialists who evaluate the accounts of the companies and organizations ensuring the
availability and legality of their financial data. Beside that they can recommend needed actions for risk
management and ways for possible reduction of the costs.
But being a good internal auditor it is far away from only knowing about the debit and credit, and
completing checklists. Audition is a complex process and to be completed it takes many different abilities
and responsibilities. As about the abilities and qualities, there are a lot of widely accepted criteria which
make an auditor a good one.
Starting from the base virtues as honesty, sincerity, loyalty, tolerance etc. Also, his/her behavior in the
work environment is very important; He/ She should have knowledge about human nature, to be able to
understand other people's temperament, to be able to evaluate the different situations, to be cooperative
Second-year bachelor student, Faculty of Economy, University of Tirana, [email protected]
126
and persistent. In addition he/ she needs to have intellectual skills like self improving abilities, to be able
to develop criticism in a positive sense, to be capable of judging impartially, to have a high level of self
control and to be open for discussions and critics.
Professionalism and Work Ethic:
Internal Auditors ought to apply and support these principles:
legality
fairness
integrity
independence and objectivism
continuous professional development
competency
confidentiality
Compulsory Qualifications
For every employee in the internal audition unit, it is required fulfilling of special conditions (based on
the normative provisions defined on the Labor Code of the Republic of Albania), as mentioned below:
Owning a second level university degree in economic sciences, law, or other disciplines according to the
needs of the audited sector.;
The internal auditor must own the "Internal Auditor" certificate, and also have at least 5 years work
experience.
The employee who does not hold the "Internal Auditor" certificate, but has at least 3 years work
experience in the company, can work on the internal audition unit, but under the revision of the superior
for the first two years.
Preferred Qualifications:
Beside of the above mentioned, qualifications, an internal auditor is preferred to have there additional
certifications, such as:
CFSA® :Certified Financial Services Auditor
CGAP ® :Certified Government Auditing Professional Additional internal audit-related certifications
supported by other independent professional organizations include:
CISA :Certified Information Systems Auditor
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CFE :Certified Fraud Examiner In addition, the valuable CPA certification is recognized separately by
each state
As I said at the beginning, completing the audition process, along with the criteria and qualification,
requires responsibility. But in order to understand the responsibilities of an auditor, firstly we should
know the hierarchy that exists inside the internal audition department.
In a company of well functioning international audition there is :
The directors of the international audition.
At the top, the head of the international audition unit, being the elite, I could call the directors of the
international audition, the connection point between the audition department and the CEO of the
company, because they send the final info and the audit results (in other words, the annual report) at the
direction border/CEO. Also they report in a written form at the titular of the company and the finance
minister for every irregularity or action, that according to the evaluation of the auditing unit, might be a
penal act. Despite the responsibilities that have to do with the CEO-s, the elite of the international
audition also organize the workflow inside the audit department, completing every specific act in different
fields (such as building the audition card) also evaluation of the control units inside the company and
giving recommendations for improvement.
The responsibility of the audition group.
They supervise the work of the auditors to ensure that auditors have full support, the audition resources
are used wisely and economically and the audition is completed according to the plan and, to the defined
methodology and standards. For important issues, the responsible of the audition group gives written
assignments to the auditors.
The Auditor.
Even though the auditor is classified at the end of the hierarchical scale inside the internal audition, he has
a lot of responsibilities. To point out is the fact that these responsibilities are closely related with the
individual qualities that a good auditor should have, mentioned at the beginning. The auditor should
exercise the auditing activity with objectivity and professionalism, in accordance with the law, also in
accordance with the defined requirements. As an auditor, he/she should keep the confidentiality of each
data or fact gathered during the audition. Every auditor should give recommendations for improvement of
the audited unit, also to increase the effectiveness of the internal auditor. He/ She must report to the
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superior for every irregularity or action that constitutes a penal act. The main responsibility, and I would
call it the key factor, the one that exactly makes the profession of the auditor really challenging, is the
requirement for continuously learning and updating their information, in order to regularly develop their
professional abilities, and to be more effective at their work.
To answer the question "What does it take to be a good auditor?" the aforementioned qualities let us know
that firstly a good auditor is an individual with a strong character, many virtues that are evaluated inside
and outside the workplace. Great communication skills, being open to criticism, strong work ethic, and
having a wide range of qualifications and certifications are also required. And last but not least, perhaps
the most important and the strongly defining required qualities is the continuous learning ability that an
auditor should have in order to improve himself continuously. This way, the successful auditor will be
able to handle in time all the nonstop growing requirements and challenges of the complex process of
audition.
Keywords: Good Auditor, Qualification, Responsibility
References
Ministry of Finance, Internal Audit Harmonization Center, Directorate of Professional Development and
Analyzes, "Internal Audit Basis 2011-2012"
Ministry of Finance, Internal Audit Harmonization Center, Directorate of Professional Development and
Analyzes, "Internal Audit Manual" 2016
Protiviti - Risk & Business Consulting Internal Audit. Guide To Internal Audit(second edition). Protiviti
Inc.2009. Retrieved
from:https://internalaudit.uonbi.ac.ke/sites/default/files/centraladmin/internalaudit/GuideInternal_
Audit-FAQs-2n_Edition.pdf
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IT Audit – Introduction of the IT Audit in an Organization / Elda HOXHAJ
Elda HOXHAJ
Abstract
To completely accomplish the main objectives of Auditing, in both private and public sector, in a era,
when the business performance, value and success are more and more depending on information
technology governance and on the related IT risk management efficiency, the introduction of an
additional professional tool, the IT Audit, is being increasingly considered as an absolute and
indispensable need.
This paper aims to treat and emphasize, through comparison and analysis, the necessity and relevance of
IT Audit, in both public and private enterprises, as an important field and strong tool of Auditing that
drives to a higher level of efficiency and ensures that the enterprise system is getting the maximum
business value / performance for itself and for all stakeholders too.
In the content of this paper, through analysis, we introduce and emphasize the role of IT Audit related to
the following topics;
Its objectives and alignment with the corresponding objectives and goals of the organization
itself;
Alignment of IT potentiality and limitation as part of organization management and performance;
IT as a risk area and its mitigation; Communicating risk and control information to proper centers
of activities of the organization;
System technology and information technology must be monitored to verify that standards are
being met, promoting appropriate values and checking for systems compliance;
IT governance as a strong support for the enterprise strategy and objectives ensuring that IT
function efficiently and effectively help enable the achievement of the objectives of the
organization as an entire structure;
Assessment of: the organizational value delivered by IT function and infrastructure; effectiveness
of IT resources and performance management; IT requirements, initiatives and IT investments
PhD Candidate at the Department of Accounting, Faculty of Economy, University of Tirana; e-mail:
130
return; the risk that may negatively affect IT environment including the organization structure and
its staff’s qualification and experience;
Professional requirements for IT Auditor; certification of IT Audit
Differences and correspondences with the financial statement audit;
Standards, principals, framework, guidelines that lead to the best practices;
Reporting; coordinating, communicating and consulting the IT audit activities / information /
findings among internal and external auditors, the board and management.
which helps to clearly identify the advantages of implementation of IT Audit in all private and public
organizations.
One important aspect of assessing the financial performance is the extraction and measurements of the
appropriate electronically financial data kept. Thus, proactive IT Audit would naturally lead to a better
financial performance, improving the organization efficiency and assuring a higher business value for the
organization.
Developing and integrating the IT Audit standards, framework and guidelines with the traditional
Auditing ones, would be for sure a fundamental step for a healthier and more efficient, private and public,
financial performance and economic system.
With its analyses and emphasise of the nature of IT Audit, highlighting the evidenced advantages of an
effective IT Audit in a reality practice, the paper’s purpose is to strongly motivate and encourage other
organization as well to introduce the IT Audit in their org chart.
The aim of this important step forward is to increase the information system / technology efficiency and
effectiveness, which consequently will bring to a higher business’s value and performance.
Keywords: Information Technology Audit, IT Efficiency, Information Systems Performance,
Certification of IT Audit
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Green Banking Practices and a Rating Application on Turkish Banking Sector / Prof. Dr.
Nalan AKDOĞAN - Serkan Aziz ORAL - Ozan GÜLHAN
Prof. Dr. Nalan AKDOĞAN
Serkan Aziz ORAL
Ozan GÜLHAN
Abstract
Today, problems such as global warming, climate change and mass environmental pollution, which are
caused by factors such as unplanned urbanization and uncontrolled industrialization, are increasingly
coming to the fore and efforts to solve these problems are becoming more important. Environmental
pollution and global warming cause climate change on the earth, which results in a decline in clean water
resources and in agricultural production, also threatens the presence of many living things on earth. As a
matter of fact, it is claimed that environmental pollution and climate changes are threatening the human
existence on the world. The environmental problems that threaten the lives of the living creatures of the
world have also increased the sensitivity to these problems. This sensitivity, not only enables the
development of environmentally friendly consumption, but also it leads to the emergence of a new
production process by increasing environmental sensitivities in production processes, raw materials and
energy, also other production inputs. Today, producers besides their corporate social responsibility, they
are not satisfied with environmentally friendly consumption products in order to attract consumers who
are sensitive to social environmental problems. They are trying to have a production process that will give
the environment least damage.
In global world, the emergence of an economic structure that is more sensitive to environmental
problems, commonly referred to as the green economy, requires sustainable development in particular,
sustainable finance and eco-friendly banking. It is a new approach to take environmental and social
responsibility risks into consideration in banking. Banks have not shown much interest in the past to
produce proactive policies in environmental issues and sustainable finance because they consider
themselves more environmentally friendly in terms of carbon emissions and pollution compared to sectors
Başkent University Faculty of Commercial Sciences , [email protected]
Türk Elektronik Para A.Ş., Ankara University PhD candidate, [email protected]
Türk Ekonomi Bankası Kosova, Başkent University PhD candidate, [email protected]
132
like energy and oil. Due to the growing importance of natural environmental awareness throughout the
world, it has recently emerged as a trend to take environmental and social responsibility risks into account
in finance. The United Nations Environment Program Finance Initiative (UNEP FI) is at the forefront of
the United Nations' Socially Responsible Investment Principles and Equatorial Principles111
. Recently
there is an increasing interest in the development of new practices and legal regulations in the areas of
sustainable development and environmentally friendly finance globally. The main idea behind developing
and disseminating environmentally friendly finance and banking practices is mitigating the risk of climate
changes and environmental problems. What is surprising is that many of these regulatory activities are
evolving in emerging economies such as China, Brazil, Bangladesh and Nigeria. As a matter of fact, the
main purpose mentioned in Environment Law No. 2872 in our country is ensuring protection of the
environment, which is the common existence of all living things, in accordance with the principles of
sustainable environment and sustainable development.
In this study, sustainable development, sustainable finance and green banking concepts were explained
and also applicability of existing practices and international exercises in Turkish banking sector. In this
framework, firstly the international literature on sustainable development, sustainable finance and green
banking concepts was examined and the common features of the financed projects were explored.
In the third part of the study, the subject was evaluated in terms of the banking sector in our country and
the results of different alternatives that could be implemented were revealed. In the last part, based on the
studies done in the literature, a rating application was made on the sample selected from the banks
operating in the Turkish Banking Sector.
Keywords: Sustainable Development, Sustainable Finance, Green Banking, Banking Sector
References
Oyegunle A., O. Weber. 2015. “Development of Sustainability and Green Banking Regulations” Ci-Gi
Papers No:65 April.
111 Oyegunle A., Weber O., “Development of Sustainability and Green Banking Regulations” Ci-Gi Papers No:65
April 2015
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Relationship between Company Audit Results and Board of Directors Components:
Examination in Retail and Cement Sector / Tuba Derya BAŞKAN
Tuba Derya BAŞKAN
Abstract
In the framework of the new regulations appeared in the big accounting scandals of the last century we
were inresult of our audit institution of the activities of both worlds in both countries has also been linked
to a comprehensive manner to the new regulations and laws. This change varies from in-house regulations
to the institutions and sanctions to which they are affiliated. This study, it was tried to determine the
correctness of the financial statements in the firms by examining how the audit reports of the board
components affect the retail and cement sector operating in a developing economy. The gender, age,
education status, size, leadership structure and independence of the management board of the companies
shall be determined and examined in relation to the opinions of the independent auditors and examined in
the retail and cement sector according to the panel data analysis.
Examination of Board Members
As a result of the literature review, it was decided to examine the gender, age, independence, leadership
structure and size of the company board members.
Gender of Board Members
The gender factor of the board components is a continuing and controversial element. Burke (1997,
2003), Zelechowski and Scienceoria (2004) and Stephenson (2004); explains the competitive advantages
that companies employing women in the board of directors can benefit. In the articles, the managers who
have consumer markets, customers, innovative thoughts, and women who think socially and
administratively have touched on the point of conscience. Kang et al. (2007) and Adams and Ferreira
(2008) found that in US-based research, women's participation in committees increased with changing
social attitudes. However, less research has been done in other developed country surveys. In Australia,
Kang et al. (2007) report, only 33% of women have a woman director, while only 51% have a woman.
Again Arfken et al. (2004) found that at least 37% of companies in 2002 in Tennessee were found to have
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at least one female manager on the board. Again, the work of Adams and Ferreira (2008) found that
women's participation in governance was seen as a legitimate tool against all internal and external
stakeholders. Catalyst (2004) reports 353 Fortune 500 companies in the United States during 1996-2000.
Companies with the highest representation of women in senior management teams have a 35% better
return and 34% better overall return in equity. On the other hand, Farrell and Hersch (2005) found that
women tend to serve in better performing institutions, but there was no relationship between gender
diversity and performance on the governing board. Again in the study of Adams and Ferreira (2008), both
indirect and direct connections were found, positive relationship between gender and management was
determined, but there is a positive relationship between return of assets and gender
Age Status of Board Members
The management of the firm is mainly composed of a mature and experienced management board (Kang
et al., 2007: 197). In Gilpatrick's (2000) study, managers who are mature and older than the less
experienced and younger age groups, appear to be higher on board memberships. Murray (1989) argues
that individuals with similar values of a homogeneous governing body and having the same historical
events should be formed. Since such management boards will be more familiar with the company and its
values, it has been determined that healthier targets will be set and communication will be done more
accurately. Houle (1990) argues, however, that an age-agnostic steering committee can provide a more
efficient division of labor; mature, experienced and financially resourceful middle age group, while young
group managers are open to innovation and provide the dynamics of business knowledge. However,
Murray (1989) argues that decisions that support short- and long-term growth can lead to
incompatibilities stemming from these age groups in the executive board.
Board of Directors and Leadership Structure
Kesner and Johnson (1990); Lorsch and MacIver (1989); Rechner and Dalton (1990), there are many
alternative views on the need for the board of directors to work as CEO at the same time. According to
Dobrzynski (1995), some managers consider separating these roles only as emergency precautions and
that some companies in financial difficulties require a temporary restructuring process. Anderson and
Anthony (1986); Donaldson (1990); Finkelstein and Lorsch (1993) view of managers is related to
managerial theory. According to this theory, internal and external uncertainty is reduced by the persons
who are in the CEO and the board of directors, and the persons responsible for the company processes
and outputs are clearly identified. At the same time, Donaldson and Davis (1991) found that increasing
stock performance would result in more stock returns
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Board of Directors and Independence
The standard view among company managers is that the independence of the board is effective. Fama
(1980) and Fama and Jensen (1983) propose the union of board members and employees within the firm
at the effectiveness of the board of directors. Rosenstein and Wyatt (1990) found that adding another
external director to the board increased corporate value. Brickley, Coles, and Terry (1994) found that the
majority of board members had positive outcomes on the stock market. It is stated that the executives who
take part in the management from outside the bullfight will act by considering the interests of the
shareholder. According to Karpoff and Lott, firms are faced with a significant cost factor because of the
fact that when corporate fraud occurs in firms, they will damage the reputation of non-company managers
in the market. Beasley (1996) examined whether a large proportion of the members of the board of
directors on the board had affected the deeds in the financial statements in particular and found a positive
result.
Board Size
Lipton and Lorsch (1992) thinks that as management grows, the effectiveness of managers' controls is
diminishing, and it becomes increasingly difficult to coordinate the difficulties of making firm strategic
decisions. At this stage, they pointed out that a new understanding of management was needed. Again,
Jensen (1993), who supported this argument, observed that an effective management struggle is difficult
and the CEO is easier to control when there are more than seven to eight executive board members.
Holthausen and Larcker (1993) found a positive relationship between board size and CEO's value, but
found no consistent finding that there was a relationship between board size and company performance.
Nevertheless, Yermack (1996) used the Q value of Tobin as an approach to market valuation, providing
evidence that smaller boards are more effective than large boards, and between 1984 and 1991, in one
instance of 452 US large industrial establishments, between board size and firm value They found an
inverse relationship.
Control of Audit Institutions
The reports of the audit institutions include partners, investors, investors, managers, business people,
buyers, trade unions, professional chambers, government, social security institutions, and closely
monitored by following the developments in this information and the information contained in the
financial statements of the enterprises. Auditing firms have a very important role in institutionalization,
correct operation and reliable results in reducing accounting errors and frauds, which is achieved by both
the internal and external audit of management and board members.
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Conclusion
The study tried to determine the relationship between the variables of the board of directors and the
results of the independent audit report opinions. After the accounting scandals, the audit opinions of the
financial report results are important for the information users. In this direction, it will be tried to
determine how the results obtained in the summer are related to the components of the board of directors.
This framework will be analyzed separately in the working cement sector and the retail sector, trying to
determine whether there are differences between the sectors and to establish relations with the board
members of the audit firms.
The study also shows that the factors of firm size, which are defined as gender and control variables in the
cement sector, are influential on auditor opinions. In the retail sector, it has been determined that auditor
opinions are not influenced by any of the board members. In other words, according to the results found
in the summer, auditor opinions are not affected by the presence of CEOs in the board of directors, gender
distribution in the board of directors, auditors, number of board members, largest shareholder share in the
board, company performance, On the other hand, it has been determined that only the gender and firm
size of assets in the cement sector affect auditor opinions. The fact that they are mostly not influenced by
the components of the board in both sectors shows that the delegates report more transparent and correct
opinions. In particular, it is very important that auditors are not affected by the independence component.
Because the auditor, who is a member of the board of directors, has no effect in the opinion of the
relevant company, in fact it should be a result.
On the other hand, the number of board members and the largest shareholder structure do not affect the
opinions of the auditors. Only in the cement sector the size of the firm and the gender factor affect the
auditor’s views. In line with these results, the opinions of the auditors in the two sectors are not affected
much by the components of the board. This leads us to the fact that the views are transparent, complete,
clear and accurate. When we check this by model performance variables and company size, we found that
only firm size is effective in cement sector. As the firm grows, changes in the views of auditors are
thought to have led to a need for more rigorous and comprehensive analysis.
In this study, a literature review with the board of directors will be studied to determine the relationship
between variables revealed the results of an independent audit report opinion. In other words, the board of
directors in accordance with the present situation with the position of employees with accounting scandals
will be studied to determine the relationship between the audit report with significant results. Retail sector
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and cement sector in mind, this framework will be subject to a separate analysis, so that will be identified
in the differences between sectors and by determining the relationship with the board components of the
audit firm it aims to contribute to the literature.
Keywords: Audit, Board of Directors, Governance
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Determination of the Materiality Levels of Group Companies in the Scope of
Independent Auditing Standards – Bayesian Group Audit Model / Prof. Dr. Nalan
AKDOĞAN - Prof. Dr. Zehra MULUK
Prof. Dr. Nalan AKDOĞAN
Prof. Dr. Zehra MULUK
Abstract
According to the auditing standards, the auditor should consider the concept of materiality while
evaluating the effect of misstatements and determining the structure, timing and extent of the
independent audit techniques and forming the audit opinion. This concept, which is closely related to
audit risk, is also related to the cost of audit and directly affects the audit quality.
In most of the company scandals, it was recognized that, the auditors manipulated the materiality
levels to successfully hide significant errors and fraudulent financial statements. Hence, regulatory
authorities needed to change their approach for materiality determination and at the same time make
considerable regulatory adjustments in the standards.
One of the most critical issues in determining the scope of audit is implementing appropriate
materiality levels. The materiality principle states that, it is the tolerable level by which the omission
or misstatement of a financial information in a financial statement is likely to influence the economic
decisions of financial statement users. For an auditor, materiality is an essential criterion in identifying
whether errors or inaccuracies may affect the true and fair presentation of the financial statements. If
the magnitude of these errors alters the users ‘opinions, they are regarded as significant in terms of
monetary value. In planning an audit, materiality is set solely for monetary value and then should be
reviewed and revised at the reporting stage.
Materiality is used as a criterion in expressing an audit opinion. At the same time, it is used as a tool
for determining the material and immaterial individual accounts in the planning stage and in applying
the sampling formulas. Materiality level is the tolerable error and is determined by applying a
materiality ratio to the determined materiality base. Gross expenditures or revenues (sales), pre-tax
income, total assets, total equity are common materiality base level determinants used depending on
the company’s main operating activities and objectives. For example, total investments could be an
Başkent University, Faculty of Commercial Sciences, [email protected] Başkent University, [email protected]
139
ideal materiality base for spending-weighted companies whereas net income before taxation and gross
sales may be used for companies traded in stock exchange and for the ones reporting net losses,
respectively.
The most widely used rules in practice for determining the materiality level are as follows:
5 to 10 percent of pre-tax income
0,5 to 1 percent of total assets
1 percent of total equity
0,5 to 1 percent of gross sales
There are various methods used in the selection of the rules listed above. They are, single financial
variable method, multiple (various), or business size as the method of principal variables, mixed or
average method and formula method.
Materiality level refers to the amount of tolerable error and therefore determined by the application of
the materiality ratio to the materiality base selected. For instance, the materiality levels that the
auditors use generally in practice are: 5% of pre-tax income, 0.5% of total assets, 1% of equity and
0.5% of total sales. An example for a possible materiality level is:
Given:
Total materiality level = 5% of the pre-tax income
Total planned materiality level = 75% of the total materiality level and
Corrections or errors to be listed in the "Unadjusted List of Differences" = 5% of the total
materiality level.
Solution:
Company’s pre-tax income = 10.000.000 TL
Total materiality level = 10.000.000x% 5=500.000 TL
Total planned materiality level = 500.000x%75= 375.000 TL
Corrections or errors to be listed in the "Unadjusted List of Differences" =
500.000x%5=25.000 TL.
International Auditing Standards (ISA) relevant to materiality are:
ISA 315 : Identifying And Assessing The Risks of Material Misstatement Through
Understanding The Entity and its Environment
ISA 320 : Materiality in Planning and Performing an Audit
ISA 330 : The Auditor’s Procedures in Response to Assessed Risks
ISA 450 : Evaluation of Misstatements Identified During The Audit
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ISA 600 : Special Considerations—Audits of Group Financial Statements (Including
the Work of Component Auditors)
ISA 315, establishes the responsibility of the auditor to identify and assess the risks of “material
misstatement” in the financial statements, through understanding the entity and its environment,
including its internal control. The standard states the important issues such as risk assessment
procedures and related activities, the entity’s internal control, analytical procedures, observation and
inspection, the required understanding of the entity and its environment, including the entity’s internal
control, identification and assessment of “material misstatement” that should be taken into account for
calculating materiality and audit risk during performing the audit. Within the scope of this standard,
the auditor identifies and assesses the risks of material misstatement at: (a) the financial statement
level; and (b) the assertion level for classes of transactions (transaction cycles), account balances, and
disclosures, to provide a basis for designing and performing further audit procedures.
ISA 320, deals with the auditor’s responsibility to apply the concept of materiality in planning and
performing an audit of financial statements. The standard emphasizes the materiality in the context of
the preparation and presentation of financial statements and explains that omissions and inaccuracies
alone or collectively will be considered material if they are expected to influence judgements of
financial statement users. The auditor obtains reasonable assurance by obtaining sufficient appropriate
audit evidence to reduce audit risk to an acceptably low level. The standard stresses that the auditor
will apply the concept of materiality in planning and performing the audit to assess the effects of
specified errors on the financial statements and audit opinion.
Audit risk is also defined in this standard as; “the risk that the auditor expresses an inappropriate audit
opinion when the financial statements are materially misstated”. Audit risk is a function of the risk of
material misstatement and detection risk. Audit risk can be expressed with the following formulas:
Audit Risk = Inherent Risk x Control Risk x Detection Risk
Material Misstatement Risk = Inherent Risk x Control Risk
Detection Risk = Audit Risk / (Inherent Risk x Control Risk)
The inherent and control risk are related to the audited company (client) and named as material
misstatement risk. The auditor may assess them separately, or may evaluate them total material
misstatement risk. To reduce the level of audit risk to an appropriately low level, an auditor should:
a) Evaluate the risk of material misstatement and
b) Limit the level of detection risk.
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To do this, auditor should carry out audit procedures for risk assessment at the level of the financial
statement, classes of transactions, account balances and disclosures.
ISA 330, regulates the auditor’s responsibility to design and implement responses to the risks of
material misstatement identified and assessed by the auditor in accordance with ISA 315 in an audit of
financial statements. The objective of the auditor is to obtain adequate and appropriate audit evidence
regarding the assessed risks of “material misstatement”, through designing and implementing
appropriate responses to those risks. Control tests, substantive audit procedures are also explained in
this standard.
ISA 450, explains the process of evaluating the inaccuracies determined during the execution of
independent audit and sets out the auditor’s responsibility to evaluate the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements. The
criteria in ISA 320 are taken into consideration while assessing material mistakes. The level of
materiality previously determined according to ISA 320, may be corrected, if necessary. According to
BDS 450, an auditor shall transmit on a timely basis all misstatements accumulated during the
execution of the audit with the appropriate level of management, unless prohibited by law or
regulation. The auditor shall also request management to correct those misstatements. If the
management refuses to correct any or all of the errors communicated by the auditor, the auditor shall
obtain an understanding of reasons why the management does not correct and consider this when
assessing whether the financial statements are free from material misstatement. According to ISA 450,
the auditor shall include in the audit documentation: (a) the amount below which misstatements would
be regarded as clearly trivial; (b) all misstatements accumulated during the audit and whether they
have been corrected; and (c) the auditor’s conclusion as to whether uncorrected misstatements are
material, individually or in aggregate, and the basis for that conclusion. The auditor will make use of
these while forming audit opinion.
ISA 600, provides guidance when the principle auditor, reporting on the financial statements of an
entity, uses the work of another auditor on the financial information of one or more components
included in the financial statements of the entity such as a division, branch, subsidiary, joint venture
or an associated company. The principle auditor, reviews the overall audit strategy and audit plan. For
this purpose, priority should be given to identifying and assessing the risk of material misstatement of
the group by first obtaining an understanding of group affiliates and their environment. To ensure this,
during the period of acceptance and retention; (including controls throughout the group), the auditor,
obtains the information about the group, the components of the group and their environment and
assesses the consolidation directives given by the group management. Furthermore, the auditor
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evaluates the information about the likely material components and obtains sufficient information to
assess the risk of "material misstatement" resulting from error or fraud in group financial statements.
In the audit of the group financial statements, it is distinctively important to determine and control the
risks of material misstatement. ISA 600 regulates principles, even if limited in this respect. For setting
the materiality level, the group audit team determines the followings during the audit of consolidated
financial statements:
(a) the overall materiality level of the group financial statements in forming the overall audit strategy
of the group,
(b) in cases of the existence of errors that are trivial to the group materiality level for special classes of
transactions, account balances or disclosures in group financial statements but are reasonably expected
to affect the economic decisions of group financial statement users, level of materiality for those
particular transaction classes, account balances or disclosures.
(c) for the purposes of group audit, the component materiality to conduct an audit or review for a
component. In order to avoid the possibility of the effect of the aggregate amount of uncorrected or
unrecognized errors in the group's financial statements to become more than the group materiality
level, the component materiality is set less than the group level
ç) for the group financial statements, the threshold at which the inaccuracies left are unambiguously
negligible
Where the component auditors are to conduct an audit for the purpose of group audit, the group audit
team evaluates the appropriateness of the materiality determined at the component level. If a
component is subject to an audit by legislation or other reasons and the group audit team decides to
use this audit to provide evidence of the group audit, the group audit team should determine whether;
(a) the overall materiality of the component's financial statements and
(b) the importance of component-level performance meet the obligations in ISA 600.
The auditor is required to design and implement appropriate actions to be employed against the
assessed "material misstatement" risks in the financial statements. The group audit team decides on the
nature, timing and scope of participation of the component auditors in their work.
If the nature, timing and extent of the work to be performed on the consolidation process or the
financial information of the components are based on an expectation that group controls are operating
effectively, or if substantive procedures alone cannot provide sufficient appropriate audit evidence at
the assertion level, the group audit team tests, or requests a component auditor to test the operating
effectiveness of those controls.
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In the group companies, the statements for the calculation of the risk of material misstatement and
detection risk in the calculation of the audit risk are found to be silent and left to the auditors’
professional judgement. Theoretical support in this context are also limited and the methods used in
practice vary but they do not fully meet the audit objective or cause excessive costs.
In this study, the methods that can be used to determine the group risk of material misstatement are
examined in calculating the group audit risk. In cases where particular classes of transactions, account
balances or disclosures that may contain misstatements less than the group’s materiality level are
included in the group financial statements; it is necessary to set the level of materiality or levels to be
applied to these classes of transactions, account balances or disclosures. In determining tolerable levels
of error for various groups of accounts, in terms of overall group financial statements (in setting
component materiality), it is important to define the threshold above which misstatements cannot be
regarded as clearly trivial to the group financial statements. In this context, it may be preferable using
an extended single-factor audit risk model to aggregate assurance multiple factors such as Bayesian
Group Audit Model.
Keywords: Group Audit, Audit Risk, Material Misstatement Risk, Materiality Level, Bayesian model
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A Research on the Failure Factors Reported in Independent Audit Reports of Delisted
Companies in Borsa Istanbul / Assist. Prof. Dr. Servet ÖNAL - Res. Ass. Murat MAT
Assist. Prof. Dr. Servet ÖNAL
Res. Ass. Murat MAT
Abstract
Independent audit activity has a crucial role to protect public interest and provide an effective
functioning of financial market by providing public disclosure and increasing confidence in the
information on financial statements. Independent audit opinions and the matters which are basis to
these opinions help stakeholders to understand the financial position of companies. The aim of this
study is to identify the risk factors, which threaten the continuity of the company by inspecting the
independent audit opinions and the matters which are basis to these opinions in the last five-years
independent audit reports of sample of delisted companies in Istanbul Stock Exchange during the
period of 2008-2016. In this context, the frequencies related to the matters seen in the last five-years
independent audit reports of sample of delisted companies in Istanbul Stock Exchange are given place
with content analysis. It is seen that matters which signal for serious problems often take place in the
previous audit reports of delisted companies.
Keywords: Audit Reports, Delisted Companies, Istanbul Stock Exchange
Osmaniye Korkut Ata University, Faculty of Economics and Administration Sciences, Department of Business
Administration, [email protected] Osmaniye Korkut Ata University, Faculty of Economics and Administration Sciences, Department of Business
Administration, [email protected]
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A Research on the Applicability of Mandatory Rotation Applied in Independent
Auditing on Certified Public Accountants / Prof. Dr. Fatih Coşkun ERTAŞ - İbrahim
ÇİDEM - Res. Ass. Oktay ÖZKAN
Prof. Dr. Fatih Coşkun ERTAŞ
İbrahim ÇİDEM
Res. Ass. Oktay ÖZKAN
Abstract
Today, a lot of information is produced by businesses for their relevance. This numerical increase has
made the reliability of the information debatable. This situation has increased the importance of
auditing. Various arrangements have been made to increase the effectiveness of the audit. One of these
arrangements is the rotation. What is meant by the mandatory rotation is to increase the impartiality
and independence of the audit.
Independence and impartiality are also indispensable for professional accountants. In this study, it is
aimed to determine whether the mandatory rotation of independent auditing should be applied to
certified public accountants and to determine the view of the members of the profession in terms of
rotation condition. It has been determined that the rotation requirement in the audit is aimed at the
desired characteristics of accounting activities. A questionnaire survey was conducted on the certified
public accountants operating in Tokat province in order to determine the approaches of the members
of the professions. The results show that professionals do not support the implementation of the
rotation condition for certified public accountants.
Introduction
Various statutory regulations related to the audit have been made in our country and it has been
enacted to make the independent audit activity with the Turkish Auditing Standards in accordance
with the international audit standards. Independent auditors will submit an audit report on the audit
activities they will undertake and their views on whether the financial information contained in the
annual reports of the operations reflects the actual situation. Again with this law, the law requires that
the same auditor be suspended for two years in the same business for seven years in a row.
146
It can be said that the rotation of the independent audit has various purposes, but the main purpose is
to maintain independence. With this study, it is aimed to give an opinion about whether the mandatory
rotation applied to auditors should be applied to certified public accountants. For this purpose, a
questionnaire was applied to certified public accountants operating in Tokat province. With this
research, the perspectives of the members of the profession about the applicability of the rotation have
been determined.
Applicability of Rotation to Accounting Profession
The purposes of mandatory rotation in the audit can be said as: to maintain the independence and
impartiality of the auditor, to bring a new point of view to audit, to increase the quality of audit, to
protect the professional skepticism of the auditor.
It is to be able to act independence and impartiality expected from the professional accountants with
the concept of social responsibility from the basic concepts of accountancy and with the rules of
working of the members of the profession and the regulations of the ethical rules to be complied with.
These qualities are indispensable for professional members. The aim of the auditor rotation
implemented in the audit is to protect the independence and impartiality of the auditor, to increase the
quality of auditing and to protect the professional skepticism of the auditors. In other words, it can be
said that the expected characteristics of auditors are the same. It may therefore be considered to apply
to a mandatory rotation in order to increase the independence and impartiality of the certified public
accountants and the quality of the prepared financial statements.
Aim of the Research, Method and Findings
The aim of this study is to determine the view of certified public accountants operating in Tokat
province to the applicability of the independent auditing mandatory rotation in accounting profession.
Data were obtained by surveys prepared by researchers. According to records of Tokat Chamber
Certified Public Accountants, 159 certified public accountants are operating in Tokat province. As a
result of the study, a total of 102 surveys were completed. The obtained data were analyzed with
SPSS.
According to findings, 41.2% of the professionals who participated in the survey did not participate in
the rotation condition to increase the quality of the prepared financial statements. At the same time,
participants did not participate in this condition because they would increase their independence
(37.3%), their impartiality (33.3%) and their honesty (34.3%). The proportion of those who do not
participate in the increase of the responsibility of professional members is 32.4%.
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Conclusion
It can be said that accounting is the only system that produces information about the operating results
of the companies. The reliability of this information, which is produced when the operator considers
both internal and external environment, is very important because all business decision makers will
benefit from this information. Businesses have an important role in the reliability of information for
certified public accountants who provide services in the field of accounting. It can be said that the
most important elements that will provide this are independence and impartial action. It can be
considered that professional members should not support any innovation and change that will
contribute to these characteristics. However, the result reached with this study does not support this
situation. Professionals involved in the research do not think that an application similar to the
mandatory rotation applied in independent auditing will increase independence and impartiality in the
accounting profession. The difficulty of implementing the rotation condition of the participants can be
interpreted as the need to support mandatory rotation, thinking that there might be more effective
arrangements to increase independence and impartiality.
Keywords: Certified Public Accountants, Audit, Mandatory Rotation
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The Challenges of Audit Performance on Public-Private Partnership Contracts -
Albanian Case / Prof. Dr. Manjola NACO - Dr.Blerta ZİLJA
Prof. Dr. Manjola NACO
Dr.Blerta ZİLJA
Abstract
The Albanian health-care sector is characterized by a gap between health-care needs and the
economic resources necessary for them. The demographic evolution, technological development, and
scientific discoveries are the main causes for the increase in public expenditures. The shortage of
resources is an increasingly serious problem, and the financing of the running costs is more urgent
than covering new assets cost. In such conditions, the government tried to encourage the
establishment of public private partnership contracts targeting the contributions of the private capital
in delivering public services in the health-care sector. In the beginning of 2015, 3 big contracts in
public private partnership were signed related to the Check-up of the population; offering the dialysis
and sterilization services in the public hospitals.
Based on the increasing costs for the State Budget but also regarding their hidden effect on a future
debt, the performance audit of these partnerships will be the next challenge for the internal or
external public audit mechanisms and structures in Albania. In this paper we will explore the best
practices related to the performance audit of public private partnership contracts in Albanian health-
care sector. In the first part of the paper we will try to explain - what we actually mean by PPP and
specifically partnerships for public service delivery. The second part explores the challenge of
evaluation and considers the contribution of theory based on approaches of the evaluation of
partnership performance. Literature review will give theoretical framework for understanding
partnership performance and offers a relevant approach to PPP’s audit. Public-private partnerships
engaged in public sector are required to consider ‘performance’ in a range of ways and that a theory
based approach can provide a multi-dimensional assessment performance. The questions asked in
popular partnership evaluation frameworks identify twelve composite partnership principles, which
in their totality could be interpreted as constituting a vision of an ‘ideal’ partnership: Purpose is clear
and realistic; Availability of appropriate financial and human resources; Clarity of motivations,
General Director, High State Control, [email protected]
Accounting Department, Economic Faculty, [email protected]
149
roles, capabilities and contributions; Sufficient organizational processes; Alignment of partners and
policies; Commitment, ownership and responsibility of partners towards the partnership;
Partnership is participative and empowering; Culture of collaboration trust and openness; Presence
(and awareness) of cultural transformation, synergy, efficiencies or exchange; Defines success
monitors and reports its performance; Partnership is continually engaging with others, developing
and learning; Clear attribution of benefits and risks
The third part of this paper explains the research methodology that will help in the identification of
the proper approaches used in the auditing performance of public private partnership in the health-
care sector. The research will be based on the combination of empirical research methods in
collaboration with different scientific case studies, to result in a consolidated outcome.
In the last part, through the results of analysis in practical cases we will discuss the next challenges
that auditors need to face in achieving a good quality performance audit and the impact that these
contracts have on public finances.
Keywords: Audit Performance, Public-Private Partnership Contracts
150
Impact of IFRS 15 Revenue from Contracts with Customers on Shipping Companies:
Reporting and Auditing Issues / Assist. Prof. Dr. Seçil SİGALI - Assoc. Prof. Dr. Dr. Ali
Fatih DALKILIÇ - Res. Ass. Elif KORKMAZ - Res. Ass. Gönenç DEMİR
Assist. Prof. Dr. Seçil SİGALI
Assoc. Prof. Dr. Dr. Ali Fatih DALKILIÇ
Res. Ass. Elif KORKMAZ
Res. Ass. Gönenç DEMİR
Abstract
Introduction
Norfolk Agreement signed at year 2002 may be considered as the starting point of convergence
between the International Accounting Standards Board (IASB) and the Financial Accounting
Standards Board (FASB). These two regulatory bodies committed to develop a set of high qualities
“compatible” standards (Carmona & Trombetta, 2010). In line with this convergence project, FASB
and the IASB have been working for over a decade to develop a joint standard on revenue recognition
and finally they came up with IFRS 15 Revenue Form Contracts With Customers.
The new standard provides the following five-step process to help entities implement the core
principle (IFRS 15); (1) identify the contract with a customer, (2) identify the performance obligations
in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance
obligations, and (5) recognize revenue when or as each performance obligation is satisfied.
Munter (2016) lists the shortcomings of current revenue recognition standard as follows:
a. There is limited guidance—one general standard for goods and services and one for
construction-type activities—supplemented by a few interpretations
b. The general standard focuses on completion of the earnings process, whereas the standard on
construction-type activities focuses on activities
c. There is a lack of comparability among entities because the lack of guidance results in
different conclusions reached by companies about the accounting for similar transactions.
Dokuz Eylul University, Maritime Faculty, e-mail: [email protected]
Dokuz Eylul University, Faculty of Business, e-mail: [email protected]
Dokuz Eylul University, Faculty of Business, e-mail: [email protected]
Dokuz Eylul University, Faculty of Business, e-mail: [email protected]
151
As stated in Dalkilic (2014), companies must assess their current systems and processes to determine
the changes that they will need to make in order to comply with new approach thus; IT and ERP
systems should be revised in line with new five step revenue recognition model. Contracts with
existing customers should be reviewed and must be modified if needed.
For shipping companies in particular, new estimates and judgments will be required. Accounting
processes and internal controls will need to be revised and extensive new disclosures will be required.
Shipping, also called as maritime transportation, covers transporting goods or passengers from a
named departure point to a specific destination with sea-going vessels. The core business of shipping
companies is to transport goods and passengers via sea-going vessels. However in today, shipping
companies provide not only maritime transportation services; they also provide other types of
transportation services (road, rail, air etc.) to their customers. In other words, shipping companies
combine two or more transportation modes to transport goods from one point to another. Combination
of two or more transportation modes under a transportation contract is called as multimodal
transportation (United Nations, 1980).
The most potential impact is expected to be on the freight services that include multimodal transports.
According to IFRS 15, “an entity should recognize revenue over time only if the entity can reasonably
measure its progress toward complete satisfaction of the performance obligation”. The appropriate
measure of progress however, may be a challenge since some transports involve both land and sea, and
costs for different parts of the transports may differ (KPMG, 2015). This may lead less comparable
financial statements amongst shipping companies in line with Munter (2016)’s argument.
Thus, the aim of this study is to highlight the reporting and auditing issues regarding the
implementation of the new standard on shipping companies, additionally this paper aims to provide
insight on how IT and ERP systems should be revised and contracts with existing customers should be
reviewed and modified in shipping companies for implementing IFRS 15.
Methodology
In line with this aim, publicly available financial reports of the leading multinational shipping
companies and footnotes will be analyzed that present the revenue recognition issues or the potential
issues encountered by the implication of the new revenue recognition standard. The preliminary
analysis shows that 30 multinational shipping companies report on the potential impacts of IFRS 15.
The results of this analysis will be discussed with the auditors from big-4 companies who have
expertise in the shipping sector. The discussions will be held in the form of semi-structured interviews
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to reflect the auditors’ perspectives on IFRS 15 implementation issues for shipping companies.
Additionally, specific examples of shipping entities entering into contracts with customers to transport
goods will be provided in semi-structured interviews to analyze the issues in depth.
Expected Findings/ Research Originality/Value
The preparers and the auditors of financial information are recently discussing the IFRS 15 financial
reporting and auditing issues across many industries. Although the new revenue recognition standard
impacts all entities to some extend by the substantial increase in required judgments and disclosures,
the effect on entities will vary depending on industry and current accounting practices (Fladt and
Heintges, 2016).
This paper aims to add to this discussion by providing perspectives of both preparers and auditors of
shipping sector financial reports. The results are expected to contribute to revenue recognition policy
recommendations for future applications.
Keywords: Revenue Recognition, Shipping, Auditing, Financial Reporting
References
Carmona, S., M. Trombetta. 2010. “The IASB and FASB Convergence Process and the Need for
‘Concept-Based’ Accounting Teaching”, Advances in International Accounting, 26, 1-5.
Dalkiliç, A. F. 2014. “The Real Step in Convergence Project: A Paradigm Shift from Revenue
Recognition to Revenue from Contracts with Customers”, International Journal of
Contemporary Economics and Administrative Sciences, 4(3-4), 67-84.
Fladt, G., S. Heintges. 2016. Revenue from contracts with customers – A comprehensive look at the
new revenue model Transportation and Logistics industry supplement
(https://www.pwc.de/de/newsletter/kapitalmarkt/assets/in-depth-ifrs-15-transportation-
logistics-supplement.pdf)
KPMG (2015). Accounting for revenue is changing: Impact on transport companies.
(https://assets.kpmg.com/content/dam/kpmg/pdf/2015/06/revenue-leaflet-transport.pdf)
IFRS 15 Revenue Form Contracts With Customers. (IASB)
Munter, P. 2016. “The New Revenue Recognition Standard: Implications for Healthcare Companies”,
Management Accounting Quarterly Winter, Vol. 17, No. 2.
United Nations, United Nations Convention on International Multimodal Transport of Goods (Geneva,
24 May 1980).
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Implications of Tax Morale in Tax Compliance Behavior – Albania’s Case / Nertila CİKA -
Fiona BALLA - Prof. Dr. Sotiraq DHAMO
Nertila CİKA
Fiona BALLA
Prof. Dr. Sotiraq DHAMO
Abstract
The present paper focuses on the implications of tax morale in tax compliance behavior in Albania.
During the analysis we have tried to give the answers of two main questions. Firstly, which are the factors
that do influence on tax morale of the Albanian taxpayers? And secondly, How does tax morale impact on
the tax compliance behaviour in our country?
The purpose of this paper is to estimate the influence of cultural and psychographic elements on tax
morale and then to analyze the immediate effect on tax compliance behavior and volunteer paying of
taxes. Taxation is one of the core issues in a country’s development policy and will remain so, even for
the years to come. So it is always necessary to pay attention to the elements that compound the taxation
system, to the changes and impacts that a certain policy and/or reform might have on the system and of
course a significant importance must be given to the taxpayer. The taxpayer and the tax administration
stand on opposite sides of the tax system, each showing different approaches to the way taxation must
work. Their relationship has been defined by the law, by rules, penalties and a government’s fiscal policy
associated with economic factors such as audit probability, tax rate, incomes and fines. In the course of
the recent years in Albania, there has been a wave of changes to improve the efficiency of the fiscal
system, and this has changed the way taxpayers react to their legal obligation to pay taxes. This has been
a very important issue for auditing purposes as well, even though the frequency of internal or external
audit seems to be low, the level of tax evasion is going down. Considering this situation, tax
administrators have another focus that impacts the whole system, which is Tax Morale.
We hereby give the definition of Tax Morale as the intrinsic motivation to comply or “internalized
obligation to pay tax” (Braithwaite and Ahmed 2005). In order to have a better understanding of the
Phd Candidate, FEUT
FEUT
FEUT
154
situation and to complete the purpose of this paper we have been focused on two different approaches. A
theoretical review of literature and research already done, not only in our country but in the region and
beyond. And furthermore a primary data analysis of the information gathered from questionnaires
prepared and distributed to different segments of the taxpayers in Albania. This paper is aimed to analyze
how taxpayers in Albania reflect the Tax Morale attitude and whether there is evidence of a correlation
between a group of factors that we have pointed out as more influential and determinative in the Albanian
business and individual taxpaying rates, and the tax compliance behavior of different segments of the
taxpayers. There are numerous factors that could be taken in consideration when it comes to a citizen's
attitude towards rules and laws, factors that is believed to have a quite notable impact on the tax morale of
the taxpayers as well. In this paper we have chosen to take in consideration for the analysis various
cultural and psychographic factors, such as: The level and fields of education (financial literacy is
believed to show high level of tax compliance), religious beliefs, political implications, rural or urban
residence and of course age and gender. It is believed and the results of the questionnaires are predicted to
show it as well, that these factors do essentially correlate with the level of volunteer taxpaying and the
compliance with the fiscal system. Each with a specific and of course different importance, the up
mentioned factors build up the tax compliance attitude of a taxpayer and creates the whole picture of a tax
collecting system based, not only but considerably based on the volunteer paying of taxes. Continuing
with a qualitative analysis of the primary data gathered by using a statistical model we have found a
connection between the tax morale of Albanian taxpayers and their tax compliance behavior. There have
been various studies around the world about the tax morale topic, especially in the United States, but in
Europe and furthermore in the Balkans this topic is considered novel.
As a consequence this study has had its limitations and is based mainly on primary data gathered.
Combining our primary data and literature review the paper is structured around four major aspects that
influence the tax compliance behavior in Albania. 1. Moral rules and social features 2.Fairness of the
system. 3. Relationship between taxpayers and the government. 4. Effects of being an ex-communist
country. The first three are analyzed mainly by the primary data. The last one has been evaluated using
existing studies for the region. One of the most interesting features is the transition process of former
communist countries. The transition process brings up many policy questions, among others the tax
system, the structure of tax administration, the degree of political participation etc. The results suggest
that trust, measured as trust in the legal system, the government, the parliament and the national
administration has a strong impact on tax morale. To conclude we have compared the level of tax morale
in Albania with some European Union countries to have an all-inclusive study from where we come from
as a country and where we intend to be in the near future. While there are still many questions
unanswered about how everyone should contribute to raise awareness for the tax morale, we have aimed
in this paper to establish two things: That there is a strong connection between the cultural and
155
psychographic background of the taxpayer and his level of tax morale, and that tax morale as a
phenomenon itself does directly impact the tax compliance behavior in Albania combined with some
specific internal and external economical factors. New strategies must be developed to satisfy the
taxpayers in order to have higher tax morale in the whole country. This is why we do believe that this
paper is useful in having a better understanding of the role that tax morale and tax compliance play not
only in paying taxes but in the whole sustainable development of our country.
Keywords: Tax Morale, Tax Compliance Behavior, Tax Evasion, Audit, Fairness of the System
156
Big Data and Auditing / Prof. Dr. Yıldız ÖZERHAN - Assoc. Prof. Dr. Ümmühan
ASLAN - Res. Ass. Burcu NAZLIOĞLU
Prof. Dr. Yıldız ÖZERHAN
Assoc. Prof. Dr. Ümmühan ASLAN
Res. Ass. Burcu NAZLIOĞLU
Abstract
Big Data is large enough to be managed by any relational database, and is the data that is continuing to
grow. The concept of data that is raw, unprocessed, recorded, stored, classified but not meant to be
meaningless and undisclosed information has become very voluminous, very fast and varied with the
developing computer and internet technologies and not being expressed by the Big Data concept which is
widely used today was initiated. Big Data's compounds were initially described as volume, speed and
diversity, called 3V, but then two more components were added to the components. Big Data’s
components called 5V are variety, velocity, volume, veracity and value. With the recent addition of
visualization, virality, and viscosity, Big Data's components began to be called 8V.
Data concept and information concept are different concepts. These concepts are often confused and used
in place of each other. The reason for this confusion is the fact that the data, which is data for one user, is
information for another user. Data are raw phenomena that are used in the production of information and
are conducive to meaning. These facts can be numerical, alphabetical or symbolic, as well as graphical. In
order for the verb to be transformed into information, it must be processed or analyzed (Karakaya, 1994:
14).
Big Data is available data and the use of these data in the work done makes the users more
knowledgeable. Big Data contains very large and complex data sets. Therefore, in accordance with the
purpose of the work, it is necessary to have the Big Data analytics (data mining) to determine which data
is useful to the user from this very large and complex data set. It is accepted that Big Data will have a
significant impact on the productivity, profitability and risk management of enterprises, but it is generally
accepted that these data have a limited value until processed and analyzed. Big Data now affects many
area as well as the accounting area. According to the research done; it is stated that Big Data will have
significant effects on the accounting and accounting profession in the next decade, so accounting
Gazi University, [email protected]
Bilecik Şeyh Edebali University, [email protected]
Gazi University, [email protected]
157
professions must improve themselves against these effects and acquire new skills and competencies. In
this context, there are opinions that Big Data will have significant effects on auditing and that auditors can
benefit from the positive effects of Big Data when conducting auditing activities.
Contribution to Big Data's audit process; increasing the quality of audit evidence (examining all of the
data) and facilitating the detection of fraud. In order to control the risk in internal audit, Big Data can be
utilized by using unstructured and non-financial information. How the activities carried out during the
audit process can benefit from the Big Data analysis is explained as follows (Byrnes, Criste, Stewart and
Vasarhelyi, 2014):
Identifying and assessing risks associated with the acceptance or continuation of an audit
agreement.
Identification and assessment of significant error risks through recognition of business and
business environment
Applying extensive analytical procedures after the auditor evaluates the risk of material
misstatement.
Determining and evaluating the risk of significant errors and/or errors in the financial
statements due to fraud, conducting cheating tests on the assessed risks,
The application of analytical procedures to the end of audit to assist the auditor in establishing
a general conclusion as to whether the auditor's assessment of the business is consistent with
the financial statements.
Big Data and Big Data analytics enable insurers to better define their financial reporting, fraud and
business risks (Ramlukan, 2015). Developments in the area of data science can be applied to make
more effective audits and to provide evidence of new audit evidence. Data can be analyzed by means
of audit data analysis (ADA) methods to define and assess the risk of planning and executing the audit.
These methods provide inspectors with new information about the risk environment and improve the
quality of analytical procedures at each stage of the audit (Byrnes, Criste, Stewart and Vasarhelyi,
2014).
There are proposals from the Big Data and Big Data analytics that the auditor needs to meet training
needs, to extend the assurance services of auditors, to enable auditors to widely use and analyze Big
Data, to ensure continuous auditing, and to update auditing standards.
Keywords: Big Data, Big Data Analytics, Accounting, Auditing
158
Auditing of Audit Quality Indicators in Electronic Environment, Their Declaration to
the Public and Suggestions for Training / Prof. Dr. Süleyman YÜKÇÜ - Özlem
KOÇAKOĞLU
Prof. Dr. Süleyman YÜKÇÜ
Özlem KOÇAKOĞLU
Abstract
In 2001 with Enron's bankrupt, America made radical changes to the independent audit profession and
brought the public oversight into this field. American Public Company Accounting Oversight Board
(PCAOB) commenced operation in 2002 and gathered a lot of authorities like standardization,
company registration and auditing. In order to prevent accounting scandals and make this process
transparent by the way of removing independent audit from the “auditor-auditee” axis, PCAOB started
the studies of establishing “Audit Quality General Framework” and “Audit Quality Indicators” in
2008. The concept release opening to public comment in 2015, consists of 28 quality indicators and is
separated into 3 parts as audit professionals, audit process and audit outputs. This created model draws
a road map for 3. parties who benefit from the independent audit but couldn't have control over the
audit process completely.
Through this study, mentioned 28 indicators' introduction is aimed. E-publishing these quality
indicators in 3- month, 6-month or yearly periods by the enterprises will increase the target benefit of
transparency reports. Analyzing indicators of the independent auditing firms by the Turkey Public
Oversight, Accounting and Auditing Standarts Authority (KGK) through creating databases will
contribute to the subjects: leading to be held standards, giving opinions about strong and weak sides of
current standards and determining auditing areas. Even, it is clear that public disclosures immediately
made in an electronic environment about the indicators acquired by the enterprises will get ahead new
scandals. As to the enterprises, these indicators' disclosures made intimately in an electronic
environment presents new means to the small-scale companies having difficulty competing against 4
large scale companies.
28 audit quality indicators offer a broad scanning, containing approximately 100 samples ratio
calculating. We suggest that accounting and auditing be studied as a lecture at the postgraduate and
doctorate programmes in order to be seen as a perspective. Also, more detailed approaches will be
Dokuz Eylül University, [email protected]
Harran University, [email protected]
159
made about the content in the study. Studying audit quality indicators as the lectures of the
postgraduate and doctorate programmes will improve a vision of the future investors at the evaluation
of the independent audit outputs.
In this study, guideless issued publicly by the PCAOB are used and numerical samples to explanatory
ratio calculations are given by the way of our brainstorming. Literature search for audit quality has
also been made.
Keywords: Independent Audit, Quality, Audit Quality Indicators.
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The Control and Auditing of E-Document, E-Journal and E-Ledger in Turkey in the
Content of E-Transformation Process / Prof. Dr. Fatma TEKTÜFEKÇİ
Prof. Dr. Fatma TEKTÜFEKÇİ
Abstract
The aim of this study is; to examine the control and auditing of electronic invoice (e-invoice),
electronic file invoice (e-file invoice), electronic journal (e-journal), and electronic ledger (e-ledger),
translational of electronic document (e-document), e-journal and e-ledger in Turkey. With this aim; by
using the smart technologies, the control and auditing of e-document, e-journal and e-ledger are
considered with their applications in Turkey and introduced with the screen views of the software.
First, literature review is done about the topic and then Turkey profile is shown with the web-based
research. Second, with case study method, which is one of the qualitative research methods, control
and auditing plot, is introduced.
The current statistical position of Turkey application is analyzed. As at the date of 05/31/2017, totally
63.009 registered user (http://www.efatura.gov.tr/ efaturakayitlikullanicilar.html; 05/31/2017), for e-
invoice and totally 7.532 registered user for e-file invoice is found available
(http://www.efatura.gov.tr/earsivkayitlikullanicilar.html; 05/31/2017).
In Turkey, with this amount of registered users, it is necessary to find an answer to the question of,
“How the control and auditing of e-document is done?”
Treasury Department Revenue Administration -GIB in Turkey; gives the responsibility for e-invoice
to the firm which takes the invoice, whatever the method of e-invoice is used (vide Tektüfekçi, 2016).
The inquiry of the invoice which passed GIB in Turkey successfully or not; over invoice eXtensible
Markup Language (XML), is done by the program of e-invoice viewer (e-Fatura Görüntüleyici, 2015:
5). E-Invoice / Application Response which opens with the program of “E-Invoice Viewer
Instrument” that is contained in XML file’s signature/financial stamp is controlled by the
“Confirmation” button. The examination of XML’s pass over GIB system (in Turkey) successfully or
not, and the examination of XML’s response as Yes/No over GIB system (in Turkey), is done with
“Inquiry” button (Gülten & Erdem, 2016: 45-47). E-invoice and e-file invoice control is mostly
Dokuz Eylul University, Faculty of Economics and Administrative Sciences Business Administration Division
of Accounting and Finance, [email protected]
161
confused with each other (http://www.habertr.org). E-file invoice is controlled with the web page of
GIB (in Turkey), without using additional program (http://www.efatura.gov.tr/earsivsorgula.html).
In Turkey implementation with the date of 05/31/2017, registered users of; e-Journal & e-Ledger are
totally 60.528 (http://www.edefter.gov.tr/edefterkayitlikullanicilar.html; 05/31/2017), the number of
software which has the compliance confirmation for e-Journal & e-Ledger are totally 186
(http://www.edefter.gov.tr/edefteruyumluyazilimlar.html; 05/31/2017). As the numbers analyzed
statistically, in Turkey it must be asked, “How is the control and auditing of e-Journal & e-Ledger
are done?”
In Turkey, e-Journal & e-Ledger must be passed by the current diagram and schematron controls
which GIB (in Turkey) publishes. These controls are done with the coherent software programs which
received approval by GIB in Turkey. The responsibility is for the firms with the users (vide
Tektüfekçi, 2016; e-Defter (Uygulama Kılavuzu), 2016). In the firms when forming e-Journal & e-
Ledger; for example for the existence of current accounts which give adverse balance, transfers of
accounts which are unrecorded and inexplicable, the accuracy of payment documents; very tight “pre-
auditing” is done. Software’s which are coherent with e-Journal & e-Ledgers, never do tax auditing
and in this stage GIB auditing in Turkey is not done (Ertürk, 2014: 18-19). Auditing member, after
having the e-Journal & e-Ledger and certification, with the help of “E-Ledger Viewer Instrument”
which gets from the web site of http://www.edefter.gov.tr, confirms the signature or the stamp right or
not (Doğan, 2012: 43-44). Auditing members, do auditing both with their own computers and with
taxpayers’ computers from different distances (e_defter_sunumuantea.pdf, 2016: 190).
As a result, in this study the control and auditing of e-Invoice, e-Journal and e-Ledger are in detail as a
new and current topic in Turkey examined. This study could be presented in international area as a
country example.
Keywords: E-Control, E-Auditing, E-Invoice Control, E-File Invoice Control, E-Invoice Auditing, E-
Journal & E-Ledger Control, E-Journal & E-Ledger Auditing.
References
Doğan, U. “100 Soruda E-Defter”, Vergi Sorunları Dergisi, Ocak 2012 Sayı: 280’in Eki.
e_defter_sunumuantea.pdf, 04/05/2016.
e-Defter (Uygulama Kılavuzu), Versiyon: 1.5, 2016.
e-Fatura Görüntüleyici (Kullanım Kılavuzu V-1.0), 2015.
162
Ertürk Yeminli Mali Müşavirlik ve Bağımsız Denetim AŞ, E-Defter ile ilgili Açıklamalar, 2014/9
sayılı Bülten.
Gülten, S. ve A. Erdem. 2016. E-Uygulamalar Seminer Notları.pdf, 10/07/2016.
http://www.edefter.gov.tr/ edefterkayitlikullanicilar.html, 05/31/2017.
http://www.edefter.gov.tr/edefteruyumluyazilimlar.html, 05/31/2017.
http://www.efatura.gov.tr/ efaturakayitlikullanicilar.html, 05/31/2017.
http://www.efatura.gov.tr/earsivkayitlikullanicilar.html, 05/31/2017.
http://www.efatura.gov.tr/earsivsorgula.html, 05/31/2017.
http://www.habertr.org/yazarlar/serbest-muhasebeci-mali-musavir-selcuk-gulten/elektronik-
faturalar-nasil-kontrol-edilecek.
Tektüfekçi, F. 2016. E-Dönüşüm Sürecinde Elektronik Muhasebe Uygulamaları: Elektronik Belge
Uygulaması-Elektronik Defter Uygulaması, 1. Basım, Aralık, KitapAna Yayınevi: İzmir.
163
Digital Auditors in Tax Auditing: Towards to E-Audit by E-Daybook / Assist. Prof. Dr.
İlker CALAYOĞLU
Assist. Prof. Dr. İlker CALAYOĞLU
Abstract
Aim of Proceeding: To provide explanatory information in the field of computer-assisted audit
techniques by referring to the literature; to give information about the development of digitalization of
private enterprises and Revenue Administration in Turkey and to explain the future of auditing in tax
auditing.
Definition of Problem: There are various computer-assisted audit techniques and scopes. Each of these
techniques tries to audit by various data. Therefore, there are advantages and disadvantages to the
parties.
The spreading e-daybook application in Turkey is the basis of the accounting record; but it does not
constitute the accounting data. Therefore this research aim to explain if it is possible or not auditing
through e- daybook; and if it is possible, there will be any weak points or not.
Research Method: The method of research is predominantly theoretical. In addition, the results of the
audit work conducted with an e-audit software have been examined in the last section. For this reason,
it is applied research. Opinions were reported about aims and futures of the e-audit application.
Extended Abstract: In last two decades, information technologies has developed increasedly. This
development has created opportunities to increase the information processing capacities of enterprises.
Within these possibilities, enterprises have recorded and continue to use their accounting information
systems at various levels which are ranging from local accounting package programs to
internationally-branded enterprise resource planning software.
The audit researches the degree of conformity according to accepted audit criteria for economic
activities and pretension of events. It accomplishes this objectively by collecting and valuing evidence
which is a process. At the end of the audit period, the results of the research are transmitted to the
relevant users. (Erdoğan, 2005: 1) It is necessary to focus on the expression of "evidence" in the
Okan University, School of Applied Science, Department of Accounting and Auditing,
164
definition. The digitization of accounting records changed the format of the evidence of audit. For this
reason, audit techniques must also change. This change has been expressed in the amended standard of
International Standard on Auditing (ISA) as follows: “The overall objective and scope of an audit does
not change in a Computer Information Systems (CIS) environment. However, the use of a computer
changes the processing, storage and communication of financial information and may affect the
accounting and internal control systems employed by the entity.” (ISA-401, article 3) As a result of
these developments, a new field called Computer Aided Auditing Techniques (CAAT) emerged.
(Messier, 1996: 247); (Elitaş & Karagül, 2010: 151) Computer aided audit techniques are packet
programs which are using filtering, summarizing and layering techniques to detect fraud indicators.
(Çalış, Keleş, & Engin, 2014: 97)
“In future years, paperless audits will become commonplace as audit clients increasingly shift to
paperless systems and audit software is developed that allows auditors to complete most procedures
on-line.” (Bierstaker, Burnaby, & Thibodeau, 2001: 159) This expectation has put the Ministries of
Finance of governments in action which are being restructured for following to taxpayer, struggling
against informal economy, saving time and cost, auditability, taxation, continuous control, preventive
audit.
In Turkey as indexed to developments in the World, in recent years, the Revenue Administration has
implemented highly efficient electronic audit using data mining techniques. It has provided new
expansions in taxpayer services as well as facilitating the work and operations of tax offices to a great
extent. The most important institution that carries out these activities is the Tax Inspection Board
(TIB). (Doğan, 2015: 19) Within this scope, e-audit applications and control tools for tax audit such as
Record Storage Requirements, Central Risk Analysis and Layering Model (CRALM), The Fraud
Document Risk Analysis System (FDRAS), Data Visualization and Analysis System (DVAS),
Labeled Product Monitoring System (LPMS) have been developed.
Until 2012 in Turkey, the taxpayers recorded their journal entries (e-Daybook) in various accounting
information systems which have different database structures. Because of this, e-daybook was not
standardized and could not be compared. According to the e-Daybook General Communiqué of the
Order No. 1, e- daybook is the whole electronic record which includes the information that should be
included in the daybooks which are obliged to be kept in accordance with the Tax Procedure Law
(TPL) and / or the Turkish Commercial Law (TCL). The standard used in the e-daybook is the most
flexible in the field of financial reporting, called eXtensible Business Reporting Language (XBRL),
which is increasingly used in the world. The e-daybook has the same legal consequences as the
daybooks kept on paper in the framework of TPL and TCL. (VUK 421, 2012) (VUK 454, 2015)
165
An audit file similar to the Standard Audit File for Tax, SAF-T model designed to provide tax auditing
data that have worked on long time by EU countries is expected to come into effect in our country in
the coming years. In this regard, it is useful to follow the developments in XBRL-GL used in e-
daybook closely (Doğan, 2015: 20) (Doğan, 2013: 346-348).
The operation of the IRIS which is an e-audit application explained for the above goal-oriented.
Nonetheless, criticisms were made by comparing the aim of the tax audit with audit conclusions.
Keywords: CAAT, E-Audit, E-Daybook, XBRL GL, SAF-T
References
Çalış, Y. E., E. Keleş & A. Engin. 2014."Hilenin Ortaya Çıkarılmasında Bilgi Teknolojilerinin Önemi
ve Bir Uygulama", Muhasebe ve Finansman, (63), 93-108. Retrieved from
http://journal.mufad.org/attachments/article/748/6.pdf
Bierstaker, J. L., P. Burnaby & J. Thibodeau. 2001. "The Impact of Information Technology on the
Audit Process: An Assessment of the State of The Art and Implications For the Future",
Managerial Auditing Journal, 16(3), 159-164. Retrieved from
http://www.emeraldinsight.com/doi/abs/10.1108/02686900110385489
Doğan, U. 2013. 550 Soruda e-Fatura ve e-Defter (3'üncü ed.). Seçkin Yayıncılık.
Doğan, U. 2015. "Vergi Teknolojileri", Vergi Sorunları Dergisi, 38(322), Temmuz pp. 9-40. Retrieved
from http://www.vergisorunlari.com.tr/makale/vergi-teknolojileri/7994
Elitaş, C., & A. A. Karagül. 2010. "Bilgisayar Destekli Denetim Teknikleri", Sosyal Bilimler Dergisi,
Aralık12(2), 145-160. Retrieved from http://www.acarindex.com/dosyalar/makale/acarindex-
1423867085.pdf
Erdoğan, M. 2005. Denetim (2'inci ed.). Ankara: Maliye ve Hukuk Yayınları.
ISA-401. (n.d.). Auditing In a Computer Information Systems Environment. IFAC.
Messier, W. F. 1996. Auditing: A Systematic Approach. Mcgraw-Hill College.
VUK 421. 2012. Vergi Usul Kanunu Genel Tebliği. Ankara: Maliye Bakanlığı.
VUK 454. 2015. Vergi Usul Kanunu Genel Tebliği. Ankara: Maliye Bakanlığı.
166
Sustainable Development as a Human Right and Supreme Audit Institution / Mahmut
GÜLER - Pınar AKPINAR
Mahmut GÜLER
Pınar AKPINAR
Abstract
Sustainable development has adopted gradually and globally because of humanitarian problems,
environmental disasters and negative influences of development policies and interrogation of their
connections to each other. These developments cause to change the structures of international or
national institutions as well as leading a change in their policies and audit mechanisms. Thus, the audit
methods of Supreme Audit Institution (SAI) are inevitably affected by this transformation.
In this article, it is aimed to present the historical background of sustainable development while
confirming as a human right and to research the influence of sustainable development into audit
mechanisms. In addition to this the audit mechanism of SAI is examined through sustainable
development. the suggestions on transformation of the audit methods which are globally important are
presented to the practitioners and academia. It is also targeted to be inspirable for further studies
carried out in the related topics of this article.
In conclusion, it is argued that new audit methods peculiar to sustainable development should be
adapted rather than using traditional methods and roles regards to achieving integrated the authority of
practitioners with a human-rights based approach. It is also suggested that the new performance audit
methods parallel to the aims and actions in 2030 Agenda should be developed and the audit should be
carried out within the cooperation of international institutions and other countries’ SAI to achieve
SDGs.
Keywords: Sustainable Development, Human Right, Audit Institution
Auditor, MSc Student in Urban and Environment Policies – Ankara University REC Turkey Project Manager and PhD Candidate in Urban and Environment Policies – Ankara University
167
Interaction of Independent Audit Reports and Management Performance / Prof.Dr. Ali
HALICI - Assoc. Prof. Dr. Deniz Umut ERHAN
Prof.Dr. Ali HALICI
Assoc. Prof. Dr. Deniz Umut ERHAN
Abstract
Management process exhibits characteristic of a company’s decision-making behavior under
significant financial and economic conditions. Due to that characteristic, it is highly expected that the
quality of corporate governance will positively affect the results of the company’s economic activities
and reflects an impact on share prices together in line with the effective market conditions.
The primary goal of accounting function of the firms is to provide valuable information to all
stakeholders of the subject firm. Among that stakeholders, the key decision-makers are the managers
at every level of the organizational hierarchy.
As stated in the conceptual framework, main outputs of the accounting process e.g. financial reports
are purposely utilized for the assessment of the management’s proficiency and responsibility besides
the overall performance of the management.
The continuity principle of accounting is explicitly emphasized at the conceptual framework as a main
responsibility of any firm in assuring a sustainable corporate performance. This responsibility is one of
the principles of the corporate governance and take place in the definition of the good corporate
governance practices. As known corporate governance covers the factors tied to the transparency,
accountability, fairness, responsibility and reliability of management. When wholly taken the proper
implementation of these principles are inevitable rapports of a sustainable corporate performance.
Since, the financial success achieved after the properly applied principles is a concrete indicator of
sustainable value creation. Dependently, corporate governance is a management philosophy aims the
maximization of company value together with value-creation capacity of the company.
As well-known the main purpose of the independent audit is to improve the trust against the financial
reports of a company and to objectively illustrate the outcomes of the managerial decisions taken.
When discussed with that point, the growth and sustainability aspects of a company become critical
Başkent University, Faculty of Commercial Sciences Başkent University, Faculty of Commercial Sciences
168
under severe competition sphere. The rapid dissemination of the information due to technological
advances, the tightened integration of national economies are also crucial influences to the competitive
power of companies at both local and also global levels. It is indisputable that the companies holding
high productivity figures and maintaining favorable performances will survive under that mentioned
instances. Needless to say, productivity and performance of companies are likewise closely related to
the investment options and national welfare.
Financial performance measurement is, measuring the outcomes of the company’s financial policies
and activities. Whereas financial performance is the indicator designating the financial standing,
returns of investments and risk levels of a company. Financial performance provides vital information
to decision-makers while taking healthy verdicts in evaluation of past periods, taking proper
investment and monetary decisions and allocating resources. Financial performance enables the
decision-makers’ choice among conflicting, opposing and competing alternatives upon the sound
analysis of the functional performance in resource allocation, productivity and profitability. “Multiple
Criteria Decision Making” techniques are heavily used for that problem-solving cases where multiple
and opposing factors are in place (Bülbül ve Köse, 2009). “Multiple Criteria Decision Making”
technique is a method of weighting and prioritizing options with numerous criteria.
Determination of Managerial Effectiveness
In determination of managerial effectiveness, Balanced Scorecard methodology is one of the strategic
approaches gained reputation, currently. By “Balanced Scorecard” methodology, companies can
assess the value and contribution of the intangible assets besides the well-known tangible assets. The
four dimensions under “Balanced Scorecard” are financial, customer, internal processes, learning and
growth perspectives. Among those financial perspective is the one intended for managerial
effectiveness assessments.
Performance Assessment by Financial Ratios
Financial ratios are indicative references to strengths and weaknesses of a company relative to the
main aspects corresponding to liquidity, growth and profitability. Financial ratios are also suitable
means in benchmarking companies, in two ways. One of them is to compare a company within itself,
other way is to compare it with a similar company. When comparing internally, the historical datasets
associated with financial rations were arrayed and the variations in them between periods were
investigated in addition to budgetary actualizations.
The Ratios Used in the Study
Current Ratio (CR) Current Assets / Current Liabilities
Liquidity Ratio (LR) Current Assets – Inventories / Current Liabilities
169
Total Assets Turnover Rate (TATR) Net Sales / Total Assets
Net Profit Margin (NPM) Net Period Profit / Net Sales
Equity Capital Profitability (ECP) Net Profit / Equity
Under this study, the management performance of BIST companies from several sectors will be
assessed and the correlation between independent audit findings and management performance scores
of these companies will be investigated.
Keywords: Independent Audit Reports, Management Performance, Financial Ratios
170
The Effect of Institutional Social Responsibility within the Context of Sustainability
Statements on Profitability: A Research on BIST Sustainability Index / Prof. Dr. Azzem
ÖZKAN - Assoc. Prof. Dr. Şükran GÜNGÖR TANÇ - Bahşende MUCUK
Prof. Dr. Azzem ÖZKAN
Assoc. Prof. Dr. Şükran GÜNGÖR TANÇ
Bahşende MUCUK
Abstract
The publication of Borsa İstanbul Sustainability Index since 2014 has become an important
development for businesses which aim sustainable development in our country. This platform helps
the development of institutional sustainable reporting and sustainable accounting elements in our
country.
The purpose of the study is to analyze whether institutional social responsibility statements of
enterprises within the context of sustainability reports have an effect on profitability which is one of
the indicators of financial performance. Within this context, 2011-2016 sustainability reports of 35
enterprises in Borsa İstanbul Sustainability Index in 2016 and the information given in activity reports
about institutional social responsibility were analyzed. As for indicators of financial performance, the
enterprises’ financial rates of the related years were used as dependent variables in the study. The
words determined as independent variable are employee, customer, environment, society, shareholder,
sustainability, risk management and innovation. Financial performance was tested with ratio analysis
method and institutional social responsibility statements were tested with content analysis within the
context of sustainability reports and activity reports. According to the key findings obtained, risk
management independent variable was examined in terms of profitability and since probability value
is p= 0,0000<0,10, the effect of risk management variable on profitability variable is statistically
significant and since the variable coefficient is c= 9,291218>0, a positive strong correlation was found
between the two variables.
Erciyes University, Faculty of Economics and Administrative Sciences, Department of Management Nevşehir Hacı Bektaş Veli University, Faculty of Economics and Administrative Sciences, Department of
Management
Nevşehir Hacı Bektaş Veli University, Institute of Social Sciences
171
Introduction
Enterprises should first of all decide on their reason for being so that they can reach their social and
economic targets. It is a predictable truth that economic crises occur when the enterprises’ reason for
being is expressed as only “profit” and when environmental and social factors are not paid attention to.
Within these limits, studies should be conducted to generalize enterprises which consider the
conditions of the individual, the society and the environment for a balanced economic development,
which fulfil their institutional social responsibilities and thus aim for sustainable development.
Today, it can be seen that with the addition of individual, social and environmental conditions to
institutional management in the way for sustainable development, a great number of enterprises
enlighten their shareholders about their environmental, social, economic and management activities
and efforts by publishing institutional social responsibility or sustainability reports and present
transparent information to investors interested in them in the stock market and conduct some activities
to provide the products and services their stockholders need. Within this framework, enterprises have
considered not only economic income but also the social and environmental risks of their activities
and taken a step to take precautions and thus have shown progress. Not only enterprises but also
consumers are now analyzing the effects and results of the products they are considering to buy or
researching about. In turn, shareholders also expect transparent information under the given
circumstances.
It can be seen that only the profit aiming management strategies of enterprises can result in failure in
terms of long term sustainability.
Purpose of the Study
The purpose of this study is to analyze the institutional social responsibility statements of 35
enterprises in BIST sustainability index and to test whether they influence financial performance.
Another purpose was to find out the association between the financial performance of the enterprises
and institutional social responsibility by taking into consideration whether activities about institutional
social responsibility influence investors or those around the enterprise. As a result of the findings
obtained, the study attempts to explain how and to what directions the institutional social
responsibility activities of the enterprise cause changes in the thoughts of the inner and outer
environment of the investors.
Scope of the Study
35 enterprises in BIST Sustainability Index were analyzed in the study. Sustainability reports and
activity reports of the enterprises in BIST Sustainability Index between the years 2011 and 2016 were
172
determined as independent variable while the financial reports between the years 2011 and 2016 were
determined as dependent variable and the analyses were conducted.
Research Method
In this section, activity reports of enterprises in BIST Sustainability Index between the years 2011 and
2016 and their institutional social responsibility activities in sustainability reports and their financial
reports between 2011 and 2016 were analyzed.
In the first stage, employee, customer, environment, society, shareholder, sustainability, risk
management and innovation definitions in the activity reports of the enterprises were analyzed with
content analysis method and how many times which word was used was calculated.
In the second stage, ratio analysis was used to assess the financial performances of the enterprises
between the years 2011 and 2016. Financial ratios chosen for the study were profitability, activity
structure, financial structure and liquidity rates. The rates were calculated for 35 enterprises in the
BIST Sustainability Index by using financial tables. The data for financial rates were taken from
FİNNET 2000 web page (http://www.finnet2000.com/F2000Plus).
In the last stage, principal components method and panel least squares method were used to assess
content analysis results and financial ratio results statistically. Financial ratios used to find out the
financial performances of the enterprises were determined as dependent variable, while the
institutional social responsibility words were determined as independent variable.
Key Findings of the Research
Principal components method and panel least squares method were used to assess the content analysis
results and financial ratio results statistically, which was the last stage of the study. Profitability rates
used to find out the financial performances of enterprises were determined as dependent variable,
while institutional social responsibility words were determined as independent variables. Tables for
the results of the study are shown and interpreted below.
173
Table 1: Findings of the effect of enterprises’ institutional social responsibility statements on
profitability rates
Dependent Variable: Profit
Method: Panel Least Squares
Cross-sections included: 35
Total panel (balanced) observations: 210
Variable Coefficient Std. Error t-Statistic Prob.
Customer 0.101708 0.345895 0.294043 0.7690
Shareholder -2.013440 1.559478 -1.291099 0.1981
Risk Management 9.291218 1.810928 5.130639 0.0000
Sustainability -1.278183 0.556617 -2.296342 0.0227
Society -2.743353 1.193155 -2.299243 0.0225
İnnovation 2.399928 2.109925 1.137447 0.2567
Environment 1.103349 0.529209 2.084901 0.0383
Employee 1.846390 0.411426 4.487783 0.0000
R-squared 0.065236 Mean dependent var 500.9713
Adjusted R-squared 0.067524 S.D. dependent var 34.79207
S.E. of regression 288.0162 Akaike info criterion 14.20126
Sum squared resid 16756574 Schwarz criterion 14.32877
Log likelihood -1483.132 Hannan-Quinn criter. 14.25281
Durbin-Watson stat 0.473614
Conclusion and Assessment
Within the context of the study, sustainability reports and activity report statements of 35 enterprises
in BIST Sustainability Index between the years 2011 and 2016 were determined as independent
variable while the financial reports of the enterprises between the years 2011 and 2016 were
determined as dependent variable. 8 variables were determined within the context of activity report
statements. These variables are customer, employee, environment, society, shareholder, risk
management, sustainability and innovation. Profitability rates were preferred as dependent variable for
the measurement of financial performances of enterprises.
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In the first stage, content analysis was conducted for 8 independent variable concepts mentioned above
which were in the activity and sustainability reports of enterprises and how many times which word
was used was calculated.
In the second stage, ratio analysis was conducted on dependent variables chosen as the financial
performance indicators of the enterprises. Profitability variable, which was the independent variable,
includes 4 different ratios (activity profit-net profit-capital stock profitability-active profitability) and
these ratios were reduced down to one variable with principal components method. Finally, the effect
of social responsibility statements on financial performance were found by using panel data least
squares method.
The results of the study were as follows:
According to the coefficient estimates calculated by panel data analysis LSC method, shareholder
sustainability and society coefficients were found to be negative on the basis of profitability ratios.
This means that the related variables influence profitability negatively. Customer, risk management,
innovation, environment and employee coefficients were found to be positive. This means that the
related variables influence profitability positively.
In summary, statements given by enterprises within the context of sustainability reports influence their
financial performances positively. Enterprises should conduct their social responsibility activities
effectively to maintain their sustainability.
Keywords: Sustainability, Institutional Social Responsibility, Financial Performance
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Corporate Social Responsibility and Evidence in Annual Financial Reporting in Albania
/ Dr. Ervis BEJKO - Prof As. Remzi SULO - Prof As. Albana JUPE
Dr. Ervis BEJKO
Prof As. Remzi SULO
Prof As. Albana JUPE
Abstract
Corporate social responsibility (CRS) has been approached in the accounting theory for over three
decades. Furthermore, financially succcessfull companies are reporting the environmental and social
issues in their annual financial statements, making them more accountable towards different
stakeholder groups. To help organisations in developing and implementing their social responsibility
practices various national and international voluntary guidance notes on social, environmental and
economic responsibilities are available.
The purpose of our paper is to analyse the current corporate social reporting practices and to identify
the type of information disclosed in annual report in Albania. This analysis is focused on the CRS of
the commercial banks operating in the Albania carring out a comparative survey.
For this reason questionnaries are designed to collect information from the commercial banks
that operate in Albania. Furthmore the annual financial reports are analyzed and comparared in
order to highlight the disclosure of CRS.
This research presents the main findings through the content analysis of financial reports as well
through the presentation of examples on social disclosures.
Based on the questionnaire we raised six hipothesis:
First hypothesis: Community problems
If the secondary bank operating in the Albanian market, would have been aware of the community
problems than its Social Responsability would grow.
Second hypothesis: Future involvements in CSR activities
Lector, Albania University of Tirana, Faculty of Economy
Lector, Albania University of Tirana, Faculty of Economy
Lector, Agricultural University of Tirana, Faculty of Economy and Agribussiness. [email protected]
176
The bank’s CSR would grow, if the bank would increase its involvement in social and environmental
activities.
Third hypothesis: Bank’s structure
If the Bank has a financing structure compounded from foreign capital, than the Bank’s CSR would
grow.
Fourth hypothesis: Experience
If a bank operates in the market for a longer period, than the bank’s CSR would grow.
Fifth hypothesis: Information
If the banks employees would inform thier managers regarding their activity related with CSR, than
the bank’s CSR would grow.
Sixth hypothesis: Number of employees
The banks’ CSR will grow in case the number of the emplyees will increase.
The general functional form which is being requested to be assessed is the following:
psk = f (prob_kom, pj_akt, struk, eksp, info, nr_pun)
The conceptual analysis, the variable assesment manner as well as the functional form all help in the
finding of the most appropriate model. Though the model we will control the possible effects that each
factor excrecises over the CSR of the commercial banks operatin in Albania.
Reflecting over the formulation of the hypothesis and the operationalisation of the concepts into
variables, the logistic model would take the following form:
)___( 6543211
1)(
punnrinfoekspstrukaktpjkomprobe
pskP
In which P(psk) refers to the probability that the variable psk would take the value 1, while e refers to
the Neper’s number, e = 2.71828.
The following table refers information regarding the variables included in the model assessed with
SPSS21
177
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
Step 1a
p_16Ë 1.073 .648 2.742 1 .098 2.923
p_26N 1.034 .475 4.746 1 .029 2.814
p_3Ci .162 .253 .409 1 .522 1.175
p_1Sa -.502 .694 .522 1 .470 .605
p_17E -.530 .498 1.134 1 .287 .589
p_2Sa .940 .315 8.870 1 .003 2.559
Constant -4.229 2.523 2.810 1 .094 .015
a. Variable(s) entered on step 1: p_16Ë, p_26N, p_3Ci, p_1Sa, p_17E, p_2Sa.
The abovementioned model, in assosiation with the values of the independent variables’ coeficients,
would result as per the following equation:
)_940.0530.0502.0162.0_034.1_073.1(1
1)(
punnrinfoekspstrukaktpjkomprobepskP
Main Findings
The analysis show the CRS is relatively new as concept and oriented towards the company image in
the market.
In more specific, based on the regresion model in a way that a bank in Albania to be Socialy
Responsible (to engage in CSR activities), it should be informed over the problems faced from the
community. If the bank is aware of the problems faced from the community, than it will have an
approving approach toward its CRS behaviour.
As expected, the grater the number of the banks employees, the bigger the approach of the bank
toward the CSR activities. Such a relationship may explain the fact why banks whith bigger number of
employees carry out more CSR actvities and initiatives.
On the other hand, a very important conclusion is that the banks CSR doesn’t depend from its
financing structure, meaning that there are no differences between the banks owned from foreign
shareholders and banks owned from Albanian citizens.
178
In the same logic it has been proved that, the number of years since its establishment its not an
important factor for banks carring out CSR activities. The banks experience in the market it is not
necessarily correlated with its CSR approach.
CSR in commercial banks operating in Albania doesn’t depend on the information provided from the
employees to thier managers.
Keywords: Corporate Social Responsability (CRS), Guidalences and Rules on CRS, Annual
Reporting, Banking System in Albania
179
IPSAS vs National GAAP112
: Differences and Challenges in Implementing IPSAS in
Albanian Public Sector / Dr. Dritan FINO
Dr. Dritan FINO
Abstract
A sound public accounting practice is a key element in regard to the transparency and reliability of the
financial reporting of public entities. It supports budget control, prioritization of expenditures, and
transparency and accountability in the management of public resources and delivery of public services.
Accrual-based accounting systems enable the production of financial information that provides a
comprehensive and accurate view of government financial performance, financial position and cash-
flows.
Credible, high quality financial information is thus the basis for more efficient resource allocation.
Although accounting does not directly influence the allocation of resources, an effective accounting
system performs the critical function of tracking the money and preventing and detecting financial
misconduct. As such, public accounting is connected with other Public Finance Management (PFM)
functions such as internal control, audit, revenue administration, public expenditure management and
the design of financial information systems.
The aim of this paper is to analyze the differences between International Public Sector Accounting
Standards (IPSAS) and the Albanian Public Sector GAAP (Albanian PS GAAP). At the same time, the
paper tries to emphasize the steps and the challenges of implementing IPSAS in Albanian context.
The analyses are based on official information from strategic documents of the Government of
Albania, as well as official reports form the international professional and financial institutions, such
as: World Bank, IFAC, and OECD.
112
GAAP is defined for the purposes of this paper as comprising the laws and sub-legal acts in regard to
financial reporting that is applicable to the entire public sector. Director Department of Harmonization on Financial Management and Control Ministry of Finance Republic of
Albania, [email protected]
180
IPSAS Board (IPSASB) strongly encourages the adoption of accrual based IPSAS, that are
specifically designed for the public sector, and the harmonization of national requirements with
IPSAS. However, it also recognizes the right of governments and national standard-setters to establish
accounting standards and guidelines for financial reporting in their jurisdictions. The IPSASB believes
that the adoption of IPSAS, together with disclosure of compliance with them, will lead to a
significant improvement in the quality of general purpose financial reporting by public sector entities.
In the meantime, Albanian PS GAAP is codified in a complex, fragmented and ambiguous legal
framework. It is primarily a cash basis of accounting with elements of accruals for very specific
categories of assets and liabilities. This predominantly cash basis of accounting together with poor
commitment controls is seen as a major contributory factor to the significant accumulation of public
sector arrears that is causing considerable fiscal stress. In accordance with Albania’s PFM Strategy as
approved by the Council of Ministers and published in December 2014, the Government wants to
make a transition to accrual accounting aligned with IPSAS.
Currently, public entities’ financial statements have a reasonable degree of compliance with the
requirements of Albanian PS GAAP with various exceptions some of which seem to be entity-specific
rather than generally applicable to all entities. This state of affairs is likely because of four main
factors: a lack of clarity about the precise requirements of Albanian PS GAAP; a lack of consistent
review and enforcement of the requirements of Albanian PS GAAP; the entities’ individual responses
to specific requests of their management and other supervisory bodies as to what should and should
not be included in the financial statements; and the absence of a comprehensive audit on the
consolidated financial statements taken as a whole.
The paper, as a conclusion, notes that Albanian PS GAAP has significant elements of accruals-
accounting and as such the fundamental principles underlying Albanian PS GAAP are consistent with
the fundamental principles underlying IPSAS. Examples of this include: capitalization of and
accounting for fixed assets, depreciation of fixed assets, and accounting for receivables and payables.
At the same time, implementing IPSAS is an ambitious objective of public sector accounting reform
that is neither short-term nor inexpensive. The time-period for reform is long and it is difficult
accurately to predict or even keep track of the incremental costs of the reform. The paper recommends
that Albania should follow a strategy of adopting IPSAS partially. Albanian PS GAAP should be
modified such that it is consistent with selected parts of selected IPSAS and the different parts of any
new requirements in Albanian PS GAAP would be specified as being effective from different dates so
as to allow for a phased implementation recognizing issues of: financing the reform; customizing and
181
upgrading the Albanian Government Financial Information System (AGFIS) and as well as other
entity-level accounting systems; educating, training and capacity development; and managing links
with other ongoing PFM reforms. The consistent message from all countries undertaking and having
undertaken reform is to just start and take small steps in the context of an overall plan.
Keywords: International Public Sector Accounting Standards (IPSAS), Albanian Public Sector GAAP
182
Money Laundering and Accounting Profession- Albania's Case / Prof. Dr. Sotiraq
DHAMO - Igli TOLA
Prof. Dr. Sotiraq DHAMO
Igli TOLA
Abstract
Our paper focuses on Money Laundering, the spread of this concept in our country and the cases faced
by financial and accounting professionals to curb this phenomenon.
Money laundering is the process of concealing the criminal origin of activities and investments or the
unlawful nature of financial transactions. The correct legal terminology of determining money
laundering is: Concealing or disguising the true nature, source, location, disposition, movement, real
rights in relation to property, knowing that such property is derived from a criminal offense ...113It is a
criminal activity through which crime proceeds integrate into legitimate activities, making it easier to
use them further. Paul Byron (2005), the representative of the United States Department of Justice,
states that: "Money laundering has to do with gaining wealth from illegal activities and efforts to put
these benefits into banking systems in such a way as to erase origin of money or even continue
criminal activity, using the financial system"
We chose this topic to handle with because Albania has been considered a 'paradise' for investing and
clearing money from suspicious or illegal activities, for more than 20 years. The general belief of
experts is that this phenomenon finds 'free land' in our country as a result of many economic, historical
and cultural factors. Among them, we can mention: the culture of ‘cash’ transfers; the lack of a
financial system for more than 45 years; the unstable economic situation, characterized by the 'boom'
of the construction industry; high level of corruption and of informal economy, non-complete legal
framework and administrative structures non fully functional up to year 2000, for preventing and
combating this phenomenon, etc. Although this is a global 'gangrene' because referring to United
Nations Office on Drugs and Crimes's report of 2014, money laundering in the world can reach up to $
2 trillion, or about 2.5-5% of the global GDP. Various important national and international
organizations such as Financial Action Task Force (FATF), OECD, UN, IMF, EU, etc have devised
different arrangements or guidelines to combat the prevention of money laundering. Professional
FEUT
FEUT 113
Reference Guide to AML, World Bank Group, 2011
183
organizations have also devised different guidelines for their actions in the fight against Money
Laundering.
In this paper, the objective is to highlight the factors and actors that play a role in promoting and
preventing the phenomenon of money laundering in the world and in Albania, and the role that the
accountants and auditors have in particular in this regard. In dealing with this issue, the methodology
used includes primary and secondary resources. Through the review of international and Albanian
literature. So, we start the analysis from a general point of view, focusing on the legislation and
institutions of our Republic that are committed by law to face and fight this criminal activity.
Subsequently, we will consider the activity of the DPPPP unit (General Directorate for Money
Laundering Prevention), trying to make a comparative analysis of its annual record. We are interested
also on the work and activities carried out by other institutions under the auspices of the Ministry of
Finance, such as the Directorate of Economic Crime; or even by independent institutions such as the
Central Bank of Albania, which has a special department to faces this issue. Accountants and auditors
are parties who can be involved or limit the phenomenon of money laundering, so studying their role
is the focus of our study. For this reason, we have to consider some of international guidelines and
practices, advice to be applied by accounting experts. Guidelines designed by reputable institutions
such as "The Institute of Accountants of England and Wales" or "ACCA", which guarantee the
minimization of the 'washing machine' effect in the economy. All this research aims to highlight the
extent of this phenomenon in our country, and to recommend how the situation can be improved,
focusing on the role of accountants, in order to enable the exit from the list of medium and high risk
money laundering states, by State Department in 2004.
However, we are not focused only on the in-depth examination of literature. In addition to the use of
secondary data sources, such as: reports, analyzes, cycles of scientific publications by international
institutions, attention is also devoted to the use of primary data. A specific questionnaire will be
drafted for the topic we are discussing. This questionnaire will be addressed to auditors and accounting
experts exercising their activity in the cities of Tirana, Durrës and Elbasan. Auditors and accounting
experts were selected as they are freelance professionals, who have more frequent business contacts
and are therefore more able to understand through tracking the activity and reviewing the Financial
Statements when a trading activity is trying to clear money from illegal activities. The questionnaire
will has specific questions to understand how these professionals pursue when they suspect or prove
the commission of this criminal offense from the business.
Effort will also be devoted to casting light on, the cooperation that these free professionals and their
professional organizations have with the state institutions and their opinion on how the control
procedures can be improved and what needs to be done to deepen the co-operation and collaboration.
184
Regarding the choice of the location where the questionnaire will be distributed, the 'triangle' selected
Tirana-Durrës-Elbasan, as over 60 percent of commercial activities conduct their business activity in
the area. The results obtained from these questionnaires will be analyzed and treated according to the
statistical methods that may be applied in this case, such as Correlation analysis.
Here is the importance of this work because we get familiar with the theoretical aspect of the subject,
but we also receive data from people who face this phenomenon every day, and from their opinions we
can suggest a process that would improve the situation.
Keywords: Money Laundering, Auditors, Accounting Professionals, Procedure, Financial Statements
185
Reporting and Auditing of Environmental Matters in the Scope of Sustainability Report
/ Dr. Banu SULTANOĞLU - Prof. Dr. Yıldız ÖZERHAN
Dr. Banu SULTANOĞLU
Prof. Dr. Yıldız ÖZERHAN
Abstract
Sustainability reporting has become a mainstream release for the companies and the public, where
once it was a voluntary practice. The companies that prepare sustainability reports, present information
about environmental, social and governance (ESG) performance with the aim of increasing corporate
reputation and strengthening the transparency and brand image.
Sustainability reporting was previously known as a process of communicating information about the
environmental sensitivity of entities, later ‘‘Triple Bottom Line’’, "three legs of sustainability", first
appeared in 1994 by John Elkington initiated a new broader approach, advocating a balanced reporting
of the economic, environmental and social objectives of companies (Aras ve Sarıoğlu, 2015).
While this report enables the companies to fulfill their accountability responsibilities by providing
non-financial information to all stakeholders, especially investors, shareholders, employees, associates
and non-governmental organizations, it also communicates sustainable performance and impacts of
their operating activities – whether positive or negative (Selimoğlu ve Özsözgün Çalışkan, 2016: 3).
This provides a new perspective on risk management of companies by demonstrating the link between
financial and non-financial risks and therefore provides assurance for their stakeholders (Aras, 2015).
Environmental matters constitute an important part of sustainability reports. In those reports, the
companies’ including its suppliers’ environmental sensitivity, the environmental policies employed
and the measures taken to protect the environment in terms of both qualitative and quantitative are
disclosed. External assurance of sustainability reporting has become essential, increasing confidence in
reporting the quality of sustainability performance data. Environmental issues can also be subject to
the independent audit of financial statements, especially for high-impact entities. However, it is
observed that, in Turkey, audit reports do not disclose or provide opinions on these matters. In the
context of auditing financial information regarding the environmental matters, "International Auditing
Standards Disclosure No: 1010 ‘‘The Consideration of Environmental Matters in the Audit of
Bilkent University, Faculty of Business Administration, [email protected]
Gazi University, Faculty of Economics and Administrative Sciences, [email protected];
186
Financial Statements" (IAPC No: 1010) has been published in 1998. This Statement provides guidance
on audit plans and procedures to be conducted by the auditors who have made a decision of doing so.
It is certain that an audit of environmental matters disclosed in the sustainability report will make a
significant contribution to the improvement of company reputation and trust for both public and
financial statements users. There are two international standards which are most referred
internationally – International Standard on Assurance Engagements (ISAE 3000) and the
AccountAbility AA1000 Assurance Standard (AA1000AS). In addition, Assurance Engagements on
Greenhouse Gas Statements (ISAE 3410) provides specific guidance for the assurance engagements to
report on an entity’s greenhouse gas emmissions data.
In this study, the sustainability and annual reports of the companies in the BIST Sustainability Index
are examined. It is found that external assurance for sustainable reporting is done for only 2 of 42
companies included in the BIST Sustainability Index. Furthermore, none of the enterprises’
environmental matters are under the scope of independent audit. In the sustainability reports of the
enterprises, it has been observed that there is no standard followed in terms of reporting so there is no
consistency and comparability in transferring information to the stakeholders.
Going to standardization will allow non-financial information to be presented to stakeholders in a
consistent, comparable and transparent manner. It is apparent that, the Public Oversight, Accounting
and Auditing Standards Authority, Union of Chambers of Certified Public Accountants Turkey and
Capital Markets Board of Turkey play an important role to extend the external assurance of sustainable
reporting in Turkey.
Keywords: Auditing, Sustainability Reporting, Environmental Matters
187
Auditing of Special Purpose Entities in Terms of International Taxation and Black
Money / Çağrı Özgür KARABUDAK - Assist. Prof. Dr. Soner GÖKTEN
Çağrı Özgür KARABUDAK
Assist. Prof. Dr. Soner GÖKTEN
Abstract
It is the duty of tax planning to bring tax costs to an optimal level using legal means. Especially in the
international arena, the tax advantages that the agreements for the avoidance of double taxation are
given to the contracting states constitute the essence of planning. It is also intended to conceal illegal
incomes, such as black money, tax evasion and bribery, in the structures where the original owner of
the company hides, called the tax haven by organizations such as the OECD and the G-20. For this
reason, many countries and organizations are conducting a number of studies on the supervision of
these structures. The most important examples of auditing of these structures are; The Foreign
Account Tax Compliance Act - (FATCA) which is implemented by the US, Common Reporting
Standards which was put into practice as of 2016 by long periods of studies conducted by OECD
countries and known in our country as automatic information exchange agreement and other
supervisions performed by many countries aiming at operations of their companies. These inspections
are intended to detect an illegal condition in terms of tax and black money and to punish the offender.
Countries in combat with tax evasion and tax avoidance have felt the need to cooperate and have
engaged in information exchange agreements as the most effective way to combat them. For this
purpose, the US adopted the Foreign Account Tax Compliance Act (FATCA) on March 18, 2010. This
law has introduced some obligations to non-US resident corporations in order to determine the
revenues that the US people were not disclosing. It is stipulated to make a 30% deduction from
payments made from the USA for those who do not comply with these obligations.
The subject of the FATCA Agreement is the automatic mutual exchange of certain financial
information between the two countries which are parties to the agreement. Therefore, the FATCA
Agreement is a negotiation of information exchange as well as the subject, scope and functioning are
specially created. The FATCA Agreement is essentially based on the article of exchange of
information in the agreement between Turkey and USA to prevent double taxation. However, FATCA,
upon the request stipulated in Prevention of Double Taxation Agreements (PDTA), Information
Independent Accountant and Financial, Advisor (IAFA), MK Strategic Consulting, International Tax Planning
Department, [email protected]
Başkent University, Department of Business Management, [email protected]
188
Exchange Agreements and Multilateral Administrative Assistance Agreement on Tax Issues, stipulates
how and in which content to execute automatic information exchange which is only one spontaneous
and automatic information exchange types. With this agreement, information including resident and
institutional information and financial information will be transmitted by USA party bilaterally to the
competent authorities of the country which signed the agreement.
Following these steps taken by the United States, the OECD enforced the automatic information
exchange agreement in 2016 under the name "Common Reporting Standards". Within the framework
of this agreement based on mutual exchange of information, if a company or person who is a resident
of a contracting country opens an account in any financial institution in one of the other countries, this
information will be shared with the tax authority of the country where the legal or real entity resides
in. Financial institutions will have the right to make inquiries and use this information about the
original owners of the company rather than only the owners of the company that appear in the official
documents.
It is aimed to make international tax planning structures transparent with this extremely detailed
agreement. These structures are based on the concealment of the original proprietary and the fact that
the proxy manager, who is called the trustee, acts according to the instructions from the original
owner. Therefore, since it is not possible to make a comment on relations and parties in the
commercial activities performed by the foreign country run by the trustee with the country where its
original owner resides in, the implementation of the PDTA in the framework of tax minimization does
not pose any problems. Since financial institutions will share information about the original owner
with the country in which the original owner is located due to the Automatic Information Exchange
Agreement, the related party transactions that are desired to be concealed will be revealed, and
therefore the PDTAs will not be exposed to misconduct. In countries such as the Netherlands and
Malta, where special purpose entities for tax planning purposes are heavily active, the competent
authorities are conducting audits related to the functioning of these companies. In the case of special
purpose entities, the trustees who act in accordance with the directives of the original owner so that the
original owner does not appear in the records have a voice in company management. The "trusts" that
manage the company through the Dutch central bank in order to prevent the misuse of these structures
are only able to carry out these activities through the central bank's authority documents and pass
through a very heavy supervision. Company records, transactions, bank accounts are audited to ensure
that these companies are not being used to finance any money laundering or terrorist activities.
"Trusts" who do not duly follow the procedures, face sanctions such as fines or cancellation of
authorization certificates.
189
Illegal activities such as black money, bribery and tax evasion are one of the important agenda items
of the countries and institutions such as USA, EU, OECD, G-20. The actual beneficiary of these
activities often remains behind the scenes, as the original owner is concealed in the records of special
purpose entities. For this reason, a number of measures have been put in place in order to clear the
curtain and apply sanctions to the beneficiaries. Monitoring of these structures and sharing of
information between countries through agreements are among these measures. Apparently, it will be
even harder in the coming years for special purpose entities to conduct illegal activities.
Keywords: International Taxation, Black Money, Auditing, Special Purpose Entities
190
Evaluation of Financial Information Manipulation for the Borsa Istanbul Companies
Between 2010-2014 / Dr. Eda TEKİN - Prof. Dr. Nalan AKDOĞAN
Dr. Eda TEKİN
Prof. Dr. Nalan AKDOĞAN
Abstract
The accounting system in which financial statements are produced and reported includes alternative
methods that can be applied to multiple different situations and sectors (Küçüksözen, 2005: 2).
However, there were some abuses in the financial markets related to financial information. Financial
statements can resort to misleading investors and markets by adopting to some methods. Some laws
and regulations in the markets are trying to prevent this situation in order to inform investors and
national or international markets correctly.
Through manipulation of financial information, defined as profit management, stabilization of profits,
deceptive financial reporting, creative accounting practices, and modifications on financial
information in the market, which are publicly traded and traded on the basis of investors, can be
produced inaccurate information.
Many regulations have been introduced in accounting reports through the International Financial
Tables Standards and in order to speak a language on the key output financial statements. Efforts are
being made to avoid the effects of misleading information arising from these reports which are
important for the effective and transparent operation of markets.
In Turkey, there have also been a number of implementations and arrangements in order to uncover
and prevent manipulation of financial information. Companies have also made a number of decisions
regarding the modification or amendment of accounting data for personal or corporate targets when
they are disclosed to the public. It has been mentioned that these transactions are revealed and some
sanctions are applied.
Models related to the detection of manipulation of financial information are divided into two:
Accrual-based models
Mixed models
Başkent University
Başkent University, Faculty of Commercial Sciences, [email protected]
191
The change in the financial statement items that arise due to accrual as a result of years;
Healy (1985), maximizing the earnings of company responsible authorities,
DeAngelo (1986), the acquisition of shares by publicly traded companies and the reduction of
costs,
Jones (1991) argues that companies are less profitable by providing advantages in their sector
of customs tariffs (Küçüksözen, 2005: 268).
Beneish (1999) model, which is tried to be explained in the mixed models, for the publicly traded
companies in Turkey, the companies that are traded in Stock Exchange Istanbul between 2010-2014
and thought to manipulate financial information and the companies thought to be manipulative and the
control companies in the same sector, & Lt; / RTI & gt; It will be tested by K-clustering analysis.
According to the estimation results using the model, the number of companies manipulating financial
information for the year 2013 is two. According to these results; 25% of the companies thought to
manipulate before the analysis started manipulate financial information.
As stated during modeling, information disclosed by the CMB and independent audit firms was used
during the analysis of financial information manipulation. This information has been worked on
companies that are thought to manipulate or have been subject to criminal proceedings in this context.
The analysis shows that; rather than the manipulation of financial information in the framework of the
model, a number of indicators can be identified for manipulating financial information. For these
reasons, the model is used by academicians, capital market users and investors; considered that it will
lead to making decisions on the market.
The most important result of the model is that a tax-based approach is used in Turkey to produce
financial reports. The low sales of the sales, the high stocks in the asset of the company, the cases such
as tax avoidance by resorting to the loss of passive damage; Interpreted in the analysis part of the
model.
The year 2013 was chosen as the year for which the analysis will be made and the model will be set
forth. The aforesaid year was chosen both because 2012 was the year with the best financial data after
the 2008 global crisis and also because it did not witness any manipulation. For these reasons, in 2008,
8 companies and 65 control companies, which are detected as manipulators, formed model data.
192
Detection of manipulation of financial information has been determined in previous years, when
management changed, profit policies differentiated, tax-based applications were reflected in financial
reports over the years.
In the first studies for predicting the manipulation of financial information; Low level of profit is not
disclosed, low level of profit disclosures are made, profit figures are not very much, profit forecasts
are reached.
Keywords: Manipulation, Financial Information, Financial Reports
193
Analysis of Academic Studies in Big Four Refereed Accounting Journals Published in
Turkey (2008-2017) / Müslime SÖZEN
Müslime SÖZEN
Abstract
Scientific studies which are on domestic literature are increasing in the field of accounting as it is in
other fields. The aim of this study is to analyze the articles related to Accounting Education,
Accounting Auditing, Accounting Profession and Accounting Professional Members published in the
peer reviewed academic research journals in Turkey. The articles which are published in the field of
accounting in Turkey between 2008-2017 (June) have been reviewed and evaluated in terms of
keywords and content analysis. The articles have been analyzed by classifying them into four main
categories as Accounting Education, Accounting Auditing, Accounting Profession and Accounting
Professional Members. These articles have been obtained from Mali Çözüm Dergisi, The World Of
Accountıng Scıence, The Journal of Accounting and Finance and Accounting and Auditing Review
considered as academic journals. As a result of the work, 298 articles have been taken up as a whole
and examined in general. The Journal of Accounting and Finance is a peer reviewed journal that
publishes articles on subjects with 98 articles. The most studied research topic in the articles is
accounting audit with 126 articles.
Research Method
Content analysis which is one of the methods of analysis in the field of social sciences allows for the
systematic examination of written documents. The main purpose of the analysis is to explain the data
obtained, to establish relationships and to interpret data. In the direction of the obtained data, the
subjects are determined, arranged and the findings are evaluated (Alkan, 2014: 44).
Content; Such as words, phrases, paragraphs, or all documents, based on the classification of the items
of an analytical text into predefined categories (Geray, 2004: 136). The main purpose of content
analysis is to reach concepts and associations that can explain collected data. For this purpose, it is
necessary to conceptualize firstly the collected data, secondly to organize them in a logical way
according to the emerging concepts, and thirdly to identify the themes that explain the data. In this
context, content analysis should put together similar data within the framework of certain concepts and
themes and interpret them by arranging them in a way that the reader can understand (Yıldırım ve
Uludağ University, Graduate Student, [email protected]
194
Şimşek, 2005: 39). Textual, visual, audible, any kind of content, any kind of documents can be
analyzed with content analysis technique (Geray, 2004: 133).
Content analysis has certain characteristics as a method. These are objectivity, systemicity and
generality (Holsti, 1968: 598).
Objectivity; It is possible that different researchers can observe the same results on the same
document.
Systemicity; It must be required the same measure to be used in determining units that will
enter or not enter a certain category.
Generality; It must be required that obtained findings have a theoretical basis
The articles are separated into classes by doing content analyz. The resulting analysis is presented to
the reader in an understandable manner.
Purpose of the Research and Definition of Problem
The aim of this research is to study the literature these titles which are writen on accounting education,
accounting audit, accountancy profession and accounting professional members, under taking into
account content analysis in Turkey between 2008-2017 (june). Within the scope of the scholarly
accounting journal in Turkey, Mali Çözüm Dergisi, The World Of Accountıng Scıence, Accounting
and Auditing Review and The Journal of Accounting and Finance whose articles published between
2008-2017 (june) are discussed. The basic criteria handled in the examined articles are; the number of
articles, the topic of the articles, the research approach used in the articles, and key words. Articles in
journals, Accounting education, accounting audit, accounting profession and professional accountant
members have been analyzed by considering the criteria
When accounting issues are examined, The subject that was first discussed is the education of the
accountant. Accountancy is changing by renewing itself constantly at the speed of globalization.
Accounting knowledge is constantly evolving by showing fundamental changes. It seems that
professional accountant members have had difficulty with against to these changes. The accounting
profession is mentioned to by various names in different parts in the face of a continuous flow of
information. There is a specific hierarchy from top to bottom in the accounting profession.
Professional accountant members interested in accounting knowledge are referred to by many different
names as academicians who teach accounting education, accounting teachers, independent accountants
who serve in businesses, sworn financial advisors and supervisors who provide consultancy services.
Accounting science has been subject to many researches in this respect. The main aim of this research
is to obtain information about the four main pillars of accounting science, namely, accounting
195
education, accounting audit, accounting profession and accounting profession members. It is aimed to
gain a new point of view in the light of collected information.
Scope and Restructures of the Research COPE
The peer reviewed journals subject to research published in Turkey are Mali Çözüm Dergisi, The
World Of Accountıng Scıence, The Journal of Accounting and Finance and Accounting and Auditing
Review. The numbers of these journals published between 2008-2017 (june) have been examined. A
total of 159 journals were analyzed. The articles which were analyzed by doing content analysis were
collected under four main headings and 298 articles related to the topics have been selected. Selected
articles have been described individually in the form of literature review according the subjects.
Content and Findings of Research
In this study, the number of publications published between 2008-2017 (june) have been examined
one by one by entering the internet sites of the journals by data scanning method. The numbers of the
journals ehich are not found in the archives have been reached from the journal archives section of the
Uludağ University Library. The related articles are classified under three headings. Attention points in
the articles are the key words of the article, the topic of the article, the title of the article, the method of
research used in the article, and the content of the article. Information on the articles accepted as data
is divided into three categories by content analysis method. All numbers of the journals which are
published in the period under review have been reached. All articles that can be reached have been
examined and it has been decided whether they have articles related to the field of accounting and as a
result articles collected have been listed in as journals and years.
The journals which are analyzed and scanned;
Mali Çözüm Dergisi
The World Of Accountıng Scıence
The Journal of Accounting and Finance
Accounting and Auditing Review
Research topics;
Accounting Education
Accounting Audit
Accounting Profession
Accounting Professıonal Members
The journal articles analyzed in the research have been synthesized according to the research topics
and the findings and results have been achieved. Results found in the end of the analysis have been
196
presented in detail with tables. According to the data obtained from the four journals examined, 159
journals published in Turkey between 2008-2017 (june) have been analyzed. The articles selected
from the peer reviewed journals are presented as shown in Table 2 after they are separated according
to the research subjects.
Tablo 2. Distribution of the Articles in the Journals According to the Research Subjects
Accounting
Education
Accounting
Audit
Accounting
Profession
Accounting
Professıonal
Members
Total
Number of
Articles
Containing
Subjects
Number
of
Journals
Reviewed
Mali Çözüm
Dergisi
2 31 4 9 46 55
The World Of
Accountıng
Scıence
19 45 8 12 84 38
Accounting and
Auditing Review
14 27 8 21 70 28
The Journal of
Accounting and
Finance
25 23 18 32 98 38
Total 60 126 38 74 298 159
Research articles on research topics have been divided by doing content analysis. Approximately 298
articles related to the divided research topic have been reached. Articles which are reached have been
divided according to the publication years of the journals
The article distributions obtained from four major journals, which were among the years 2008-2017
(june), have been classified as shown in Table 3. According to years, the most article writing about
research topics was published in 2016 with 35 articles. In 2016, 8 articles were published about
accounting audit in the Journal of Accounting and Audit Review. According to years, the minimum
article writing on research topics was published in 2014 with 25 articles. Looking at Table 3, although
not much difference compared to years, the average number of articles is around 30 articles per year.
197
Tablo 3. Distribution of the Articles Obtained from the Examined Journals to the Research
Subjects According To The Years
Year
s
Accounting
Education
Accounting
Auditing
Accounting
Profession
Professional
Accountant
Members
Tot
al
m
ç
Mb
d
Md
b
m
f
m
ç
mb
d
md
b
m
f
m
ç
mb
d
Md
b
m
f
m
ç
mb
d
Md
b
M
f
36
2008 0 3 2 2 3 6 3 1 0 1 1 4 1 1 3 5
2009 0 1 2 8 1 6 2 2 0 1 1 3 2 1 2 4 36
2010 0 1 0 5 4 5 0 3 0 1 2 3 0 1 3 1 29
2011 0 4 3 1 1 1 5 0 0 0 1 2 0 3 3 2 26
2012 0 0 1 2 4 5 1 3 1 1 0 3 0 0 4 2 27
2013 1 0 1 2 5 6 2 1 0 1 0 1 0 0 4 2 26
2014 0 2 1 2 2 2 3 4 0 1 0 0 2 0 0 6 25
2015 0 3 1 0 5 5 2 2 1 1 2 0 1 3 0 2 28
2016 1 3 0 1 3 7 8 2 1 0 0 1 2 1 0 5 35
2017
(Jun
e)
0 2 3 2 3 2 1 5 1 1 1 1 1 2 2 3 30
Total 2 19 14 2
5
31 45 27 2
3
4 8 8 1
8
9 12 21 32 298
Keywords: Accountıng Educatıon, Accounting Auditing, Accounting Profession, Accounting
Professional Members, Peer Reviewed Journals.
198
References
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Finansman Dergisi, Sayı:66, Nisan, 175-192.
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Araştırma (1984-2012)”, Muhasebe ve Finansman Dergisi, Sayı:61, 41-52.
Geray, H. 2004. “Toplumsal Araştırmalarda Nicel Ve Nitel Yöntemlere Giriş-İletişim Alanından
Örneklerle”, Siyasal Kitabevi, Ankara.
Holsti, O. R. 1968. Content Analysis The Handbook Of Social Psychology, Addison-Wesley
Publishing Company.
Mengülerek, İ. 2008. “Hakemli Dergi Ve Muhasebecilik Alanı Hakemli Dergileri”, Mali Çözüm, Sayı:
85, 93-103.
Meyer M. & J. Rigsby. 2001. “A Descriptive Analysis of the Content and Contributors of Behavioral
Research in Accounting 1989-1998”, Behavioral Research in Accounting, Vol: 13, 253- 276.
Önce, S. & B. Başaran. 2009. “Türkiye’deki Akademik Araştırma Dergilerinde Muhasebe Alanında
Yazılmış Makalelerin Analizi: 2000-2008”, Muhasebe ve Finansman Dergisi, Sayı: 45, Ocak,
55-68.
Prather-Kinsey, J. & N. Rueschhoff. 1996. “An Analysis of International Accounting Research in U.S.
Academic Accounting Journals”, Accounting Horizons, Vol: 10 (1), 1-17.
Sakin, T. 2008. “A Content Analysis of Papers Published in the Journal of School of Business
Administration: Accounting and Finance (1972-2007)”, İstanbul Üniversitesi İşleme Fakültesi
Dergisi, Vol: 31 (1), 13-21.
Selimoğlu, S. & Ş. Uzay. 2007. "Türkiye'de Son 10 Yılda Bağımsız Denetim Alanında Yapılan
Araştırmalar: Literatür Çalışması", Mali Çözüm Dergisi, Sayı: 83, 39-52.
Yıldırım, A. & H. Şimşek. 2005. Sosyal Bilimlerde Nitel Araştırma Yöntemleri, Seçkin Yayınları,
Ankara.
Yücel, S., M. A. Öncü & O. Kartal. 2015. “Türkiye’de Muhasebe ve Finansman Raporlama
Standartları Konularında Yayınlanmış Akademik Çalışmalar (2007-2014 Arasında Literatür
Taraması)”, Muhasebe ve Finansman Dergisi, Sayı:68, Ekim, 39-66.
199
Analyzing International Standard on Auditing 570 “Going Concern” and Related
Auditor’s Reports in Terms of Turkish Auditing Standards / Assoc. Prof. Dr. Seyhan
ÇİL KOÇYİĞİT - Assoc. Prof. Dr. Şükran GÜNGÖR TANÇ - Assoc. Prof. Dr. Bilge
Leyli ELİTAŞ
Assoc. Prof. Dr. Seyhan ÇİL KOÇYİĞİT
Assoc. Prof. Dr. Şükran GÜNGÖR TANÇ
Assoc. Prof. Dr. Bilge Leyli ELİTAŞ
Abstract
The concept of going concern is one of the General Accepted Accounting Principles and Fundamental
Principles of Accounting which is underlying the accounting standards. According to the going
concern concept; financial reports are prepared based on the assumption that the operations of
enterprises are to continue without regarding a certain period. Management of the firm is responsible
for preparing the financial statements according to going concept principle and indicating them within
the financial reports. The auditor is responsible for acquiring sufficient and appropriate auditing
evidence relating the relevance of management’s going concern assumption to prepare financial
reports and deciding about whether there is a significant uncertainty about the permanency of the
firm’s going concern aspect or not.
The mentioned responsibility is given to the auditor due to the provisions of Turkish Commercial
Code No. 6102 within the context of going concern standard being the Turkish Auditing Standard No.
570 which is published by the Public Oversight, Accounting, and Auditing Standards Authority (POA)
of Turkey. International Standard on Auditing (ISA) 570 “Going Concern” is published in Official
Gazette of Turkey, No. 28891 dated on 23rd
of January 2014 and it has come into force at the
publication date to be implemented for the auditing of the periods as from 1st January 2013. The
responsibility of the auditor on auditing the financial statements about the usage of management’s
going concern assumption and their reporting issues based on the permanency of the firm’s going
concern aspect due to auditing reports, is mentioned within ISA 570. While reporting process is held
due to ISA 570; it is necessary to deal in accordance with the form and content of the auditor’s report
Gazi University, Faculty of Economics and Administrative Sciences, Department of Healthcare Management
Nevşehir Hacı Bektaş Veli University, Faculty of Economic and Administrative Sciences, Department of
Business Administration
University of Yalova, Faculty of Economics and Administrative Sciences, Department of International Trade
and Finance
200
included in ISA 700 “Forming an Opinion and Reporting on Financial Statements” in which the
auditor's responsibility to form opinions on the financial statements is regulated besides which clearly
states the basic elements that should be included within the auditor’s reports for audits conducted in
accordance with auditing standards.
Within the context; the objective of this study is analyzing Independent Auditor’s Reports for
Financial Statements belonged to the manufacturing entities listed on Istanbul Stock Exchange (ISE)
for the period of 1st January 2016-31
st December 2016 by document analysis technique while
explaining the ISA 570 Going Concern Standard and examining the relevance of the mentioned
reports to the Turkish Auditing Standards (ISA 570 and ISA 700). Besides; revealing the differences
introduced in the auditor’s report via ISA 700 standard which is updated to be implemented for
auditing within the periods as from 1st January of 2017 is suggested to be the other objective of the
study.
Findings of the Research (Basic Findings Acquired by The Independent Auditor’s Reports of
The Firms Listed on Istanbul Stock Exchange)
The following findings are acquired by analyzing the independent auditor’s reports of the 176
firms of 181 firms listed on ISE Manufacturing Industry by March 2017, on the date this study is held.
1. Title: Though “Independent Auditor’s Report” statement should be existed as the
headline within the independent auditor’s report, it is observed that 11 firms used it as
“Independent Auditing Report” while a firm applied “Independent Auditor’s Opinion”
statement as their headline.
2. Interlocutor: All the independent auditor’s reports examined are observed to be
arranged by intending the interlocutor.
3. Introduction paragraph: While analyzing the introduction paragraphs of the
independent auditing reports; it is seen that the required explanation within the
introduction paragraph is included in the examined reports. Although the required
explanations are existed within the “introduction paragraph (relating financial
statements)” for 7 firms; it is observed that they did not include “Introduction (relating
financial statements)” title.
4. The management’s responsibility for financial statements are obviously stated within
the all examined independent auditor’s reports. All the mentioned reports include a
chapter titled as “The Management’s Responsibility Relating Financial Statements” and
this responsibility of the management (in charge of the preparation of financial statements
in the firm) is explained within the chapter for preparation of the financial statements.
5. The responsibility of the auditor is clearly stated within the all examined independent
auditor’s reports. It is seen that a chapter titled as “The Responsibility of the Independent
201
Auditor” is existed in the all examined auditor’s reports and the explanations about the
responsibility of independent auditor is given in this chapter.
6. Auditor’s Opinion: The opinions are notified within the all examined independent
auditor’s reports.
7. The Report on Other Obligations Derived from Regulations: It is observed that “The
report on other obligations derived from regulations” chapter is existed within the all
examined auditor’s reports since the mentioned paragraph is titled as “Reports on
Independent Auditor’s Obligations from Other Regulations” in auditor’s reports of 5
firms’.
8. Though majority of the reports examined include the names-family names and title of the
responsible auditor, their signatures and stamps are observed to be unedited within the 100
reports of 176.
9. It is seen that the date of the auditor’s report and the publishing place is mentioned in the
all reports.
10. The address of the auditor is observed to be existed within the all examined reports.
The Findings Acquired about the Reporting of Entity’s Ability to Continue as a Going Concern:
1. Regarding the entity’s ability to continue as a going concern, a material uncertainty is
mentioned about the conditions or events that may cause significant doubt. Though these must have
been explained within “Emphasis of Matter” paragraph (No. 19) to note that this matter does not
change the view of the auditor; it is observed to be stated as “Without qualifying our opinion, we draw
attention to the following matters” within 2 firms’ independent auditor’s reports and another firm’s
independent auditor’s report explains it inside of the paragraph titled as “Matters to be drawing
attention without affecting the opinion”.
2. When the conditions or events occur that may cause significant doubt relating the entity’s
ability to continue as a going concern; it is needed to mention the issues within “Emphasis of
Matter” paragraph to note that this matter does not change the opinion of the auditor. Although the
matters which can affect the going concern assumption are emphasized in the mentioned paragraph, it
is observed that several auditor’s reports do not mention “going concern” statement clearly and
some of them never refer the “going concern” expression.
3. Although a firm’s independent auditor’s report is observed to explain each of the matters
which can affect going concern, the going concern statement is not mentioned within the paragraph
clearly since the uncertainty is explained under the title of “Without qualifying our opinion, we
draw attention to the following matters”. Besides the auditor’s report of the firm is explained in
“result” paragraph not within the “opinion” paragraph.
202
4. While a firm’s independent auditor’s report mentions a significant uncertainty about its
going concern ability; the matter is explained within the “Other Matter” paragraph since it must have
been the “Emphasis of Matter” paragraph to note that this matter does not affect the auditor’s view.
Considering the findings above; independent auditor’s reports are mostly concluded to be arranged
due to the mentioned standards and within the frameworks of ISA 570 & 700 since few have
incompatibilities according to the present standards, for the firms included in the content of
independent auditor’s report acquired. It is interesting that the incompatibilities noticed within the
auditor’s reports are usually seen in a few firms’ reports.
ISA 570 and 700 to be implemented in the auditing of the periods as from 1st January of 2013 are
updated by the amendment notice published in the Official Gazette (Duplicate) No.30017 dated on 24th
of March 2017 to be implemented in the auditing of the periods as from 1st January of 2017.
The innovations brought relating the entity’s going concern ability by ISA 570 and 700 updated
are as the following:
1. While an uncertainty exists about the conditions or events that may cause a significant
doubt relating the entity’s ability to continue as a going concern; current ISA 570 requests to mention
them within “Emphasis of Matter” paragraph and to declare that the matters do not affect the auditor’s
opinion. However; the new ISA 570 demand to state the matters within another chapter titled as
“Significant Uncertainty Relating the Entity’s Going Concern Ability” (Paragraph No. 19 within both
current and updated ISA 570).
2. While the explanations inside the management’s responsibilities section are demanded to be
existed within Management’s Responsibilities Relating Financial Statements chapter in the current
ISA 700; the new ISA 700 requests them to be extended and makes new explanations about the
responsibilities of the management relating the entity’s going concern ability. The mentioned
explanations are as follows:
Management is responsible for;
a) Evaluating the entity’s ability to continue as a going concern.
b) Explaining the matters relating going concern, if necessary.
c) The explanations relating their obligation of using entity’s going concern basis unless they
do not have any intention or obligation to liquidate or close the business.
3. The explanations within the auditor’s responsibilities section which are demanded to be
under the Independent Auditor’s Responsibility title, in the current ISA 700; are to be extended within
the new ISA 700 to state new explanations relating the auditor’s responsibilities on entity’s going
concern ability. The explanations are as the following:
203
a) Expressing the management’s conclusion, about an uncertainty aspect on the conditions or
events that may cause a significant doubt relating the entity’s ability to continue as a going concern,
based on the auditing evidence acquired.
b) Arriving at a conclusion about the relevance of the management’s aspect on going concern
basis
c) In case it is concluded that a significant uncertainty exists; the explanations relating the
financial statements are to be mentioned by the auditor in the report. If the mentioned explanations are
suggested to be unsatisfactory, we need to give an opinion which is not positive.
d) The events are based on the auditing evidence acquired up to the date of independent
auditor’s report.
e) Therefore; further events and conditions may end the entity’s going concern ability.
Consequently; auditors are required to pay attention to the significant auditing areas (as going
concern) better, by the new reports. Owing to the fact that both the firm’s management and auditor
must disclose their responsibilities relating the financial statements clearly via the new auditor’s
reports, the new reports are concluded to contribute about increasing transparency and obtaining more
information for the users.
Keywords: ISA 570 and 700, Going Concern, Turkish Auditing Standards
204
Gender, Education, Tenure and Audit Opinion: Auditor’s Perspective / Dr. E. Serap
KURT - Dr. Murat OCAK
Dr. E. Serap KURT
Dr. Murat OCAK
Abstract
Introduction
The number of researches on earnings quality, timeliness of financial reports, rotation at the audit firm
level is increasing both in Turkey and other countries around the world.
Auditor characteristics such as gender, tenure, education, age, certification, etc. are used in the studies
regarding both earnings quality and the timeliness of financial reporting. In these studies, whether
these characteristics have impact on audit opinion, timeliness and earnings quality is also considered.
As discussed by Cahan and Sun (2015), signer auditors’ names are not included in the audit reports
and this is the main limitation for auditor characteristics-based studies.
In the studies that use ‘gender’ as an auditor characteristic, it is emphasized that female auditors are
more risk averse than male auditors and that female auditors are more conservative (Breesch and
Branson, 2009; Karjalainen et al., 2013; Hardies et al., 2014; Hossain and Chapple, 2012). In some
studies, it is highlighted that female auditors’ ethical values are higher than male auditors (Reheul et
al., 2017). However some studies emphasize that female auditors have different information
processing systems which is more effective than that of male auditors (Hossain and Chapple, 2012).
These differences cause an increase in the probability of qualified audit opinion.
Auditors’ education levels may also affect audit opinion. Financial statements audited by educated
auditors have less discretionary accruals (Yan and Xie, 2016) and audit failures. (Ye et al., 2014). On
the other hand, educated auditors are more competent and perform audit in accordance with auditing
standards (Hay and Davis, 2002). Educated auditors are more likely to issue a qualified opinion.
Trakya University, Faculty of Eco.&Adm. Sci., Dep. of Business Ad., [email protected]
Trakya University, Uzunköprü School of App. Sci., Dep. of Bus. Info. Man., [email protected]
Note: In the whole study, independent auditor term used as the signer of the independent audit report
205
The duration of auditor and auditee relationship may affect audit opinion. The findings on tenure in
literature are generally at the level of audit firm. These findings emphasize that longer tenure cause a
decrease in the probability of qualified opinion because of auditor independency (Vanstraelen, 2000;
Davis et al., 2000; Chin et al., 2011, Ocak, 2016). In this study we use tenure variables at auditor level,
not audit firm level.
Previous empirical studies on audit opinion using Borsa İstanbul firms are as follows. The content
analysis of audit reports (Akdoğan et al., 2015; Özkul and Özdemir, 2015), the factor affecting audit
opinion (Özcan, 2016), audit opinion and earnings management (Türel et al., 2017; Ocak, 2016), audit
opinion and audit rotation (Yaşar, 2015; Ocak, 2016), audit opinion and stock performance (Aygören
ve Uyar, 2007; Kara, 2015), audit opinion and corporate governance (Akdoğan et al., 2016), audit
opinion and audit firm tenure (Türel, 2013), audit opinion and firm performance (Nuhoğlu and Parlak,
2008; Adiloğlu and Vuran, 2011).
In this study, we focus on audit opinion and we use variables at auditor level regarding independent
audit. We investigate the effects of auditor characteristics such as gender and education level on audit
opinion by controlling the attributes of audit firm and auditee.
Research Methodology
1025 firm-year observations which traded over the period 2008-2013 in Borsa İstanbul are used in the
study. We chose the sample on the basis of the following criteria. Financial firms are excluded because
financial companies are subjected to different regulations. Tourism and sport firms are eliminated
because of having different reporting period. We could not reach financial statement information and
auditors’ education levels of some firms.
All firm-level variables are collected from the firms’ annual reports, KAP database, the FINNET
database, KGK database, and auditors’ resumes.
In this study, logistic regression analysis is practiced and control variables at sector and year level are
used. Audit opinion (Opinion) is dependent variable; education (Education), gender (Gender) and
auditor tenure (Tenure) are test variables. Firm size (LnSize), audit firm size (Big4), firm leverage
(leverage), return on assets (Roa), loss (Loss) and firm age (LnAge) are control variables. Research
model is as follows.
Opinionit = β0 + β1Genderit + β2Educationit + β3Gender*Educationit + β4Tenureit
+ β5ShortTenureit + β6Big4 + β7lnSizeit + β8Levit + β9lnAgeit + β10Roait + β11Zmjwskiit + β12Year
Dummiesit + β13Sector Dummiesit + εit
206
Opinionit = 1 if company had qualified audit report, 0 otherwise; Educationit= 1 if the engagement
partner degree is master or Ph.D., 0 otherwise; Tenureit= the duration of the engagement partner and
client relationship; Gender*Educationit = 1 if engagement partner is female and holds master or Ph.D.
degree, 0 otherwise; ShortTenureit = 1 if the duration of the engagement partner and client relationship
is equal or less than 3 years, 0 otherwise; Big4= 1 if audit firm is one of the big4 audit firms, 0
otherwise; Genderit = 1 if the engagement partner is female, 0 otherwise; LnSize = the natural
logarithm of year-end total assets; Levit = total liabilities divided by total assets; ROAit = net earnings
divided by total assets; LnAgeit = the natural logarithm of number of years since formation; financial
vulnerability (Zmjwskiit) using Zmijewski’s model (1984) is calculated as -4.3-4.5 (net income/total
assets) + 5.7 (total liabilities/total assets) + 0.0004 (current assets/current liabilities). We also include
time indicators to control potential time effects (Year Dummiesit), and sector indicators to control the
effects of industry (Sector Dummiesit) in all regressions. ShortTenureit(<=3): 1 if the duration of the
engagement partner and client relationship is equal or less than 3 years; 0 otherwise.
Results
Table 1 summarizes descriptive statistics regarding the estimation model. For whole sample, mean
value of qualified opinion (Opinion) is 11%. The mean value of female auditor (Gender) is 14% and
21% of auditors have master’s or Ph.D degrees (Education). The duration of auditors and auditee firms
relationship (Tenure) is 2.60 years.
First column in Table 2 summarizes main results. There is positive and significant relationship
between audit opinion (Opinion) and auditor’s education level (Education) while there is an inverse
relationship between audit opinion (Opinion) and auditor tenure (Tenure). Gender has no effect on
audit opinion (Opinion). These results indicate that auditor’s education level (Education) increases the
probability of receiving a qualified audit opinion (Opinion). On the other hand, tenure (Tenure) causes
less probability of receiving a qualified opinion (Opinion) because of auditor independence.
Second column in Table 2, we create an interaction variable which is Education*Gender. This variable
shows that the effect of the auditor who is both female and holds master’s or Ph.D degree on audit
opinion. The result of interaction variable –Education*Gender- shows that there is an insignificant
association.
Fourth column in Table 2 presents detailed findings regarding the relationship between audit opinion
and auditor tenure. Short tenure (<=3) between auditor and auditee increase the probability of
receiving a qualified audit opinion.
207
There is a negative and significant relationship between audit opinion (Opinion) and audit firm size
(Big4). Leverage (Lev), Zmijewski financial condition index (Zmijewski) have positive impact on
auditor opinion (Opinion).
The paper presents two important findings. Firstly, education level is a significant factor on opinion.
Secondly, longer relationship between auditee and auditor causes a decrease in audit quality.
Keywords: Audit Opinion, Auditor’s Perspective, Auditor Characteristics
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Table 2. The Results of Logistic Regression
(1) (2) (3) (4)
VARIABLES Opinion Opinion Opinion Opinion
Gender 0.0665 -0.0336 0.0615 -0.0318
(0.430) (0.453) (0.429) (0.453)
Education 0.827*** 0.794*** 0.833*** 0.802***
(0.263) (0.264) (0.263) (0.265)
Education*gender 0.918 0.824
(1.266) (1.262)
Table 1. Descriptive Statistics and Univariate Analysis (T Test)
Variables Mean Mean Differences
T-Score
Mean Differences
T-Score Whole Obs. Gender=0 Gender=1 Education=0 Education=1
Opinion 0.11 0.09 0.04 2.05** 0.06 0.13 -3.32***
Gender 0.14 0.18 0.04 5.24***
Education 0.21 0.24 0.06 5.24***
Tenure 2.60 2.70 2.31 2.23** 2.67 2.52 0.96
ShortTenure(<=3) 0.75 0.74 0.81 -1.99** 0.74 0.77 -0.84
Big4 0.51 0.50 0.82 -7.74*** 0.58 0.45 3.25***
LnSize 19.42 19.35 19.79 -3.39*** 19.51 19.09 3.60***
Lev 0.46 0.46 0.47 -0.33 0.46 0.45 0.80
LnAge 3.49 3.48 3.68 -5.16*** 3.53 3.45 2.27**
Roa -0.04 -0.06 0.04 -0.57 -0.06 0.02 -0.53
Loss 0.33 0.33 0.23 2.52*** 0.33 0.27 1.66**
Zmjwski 1.23 1.59 1.42 1.61* 1.55 1.61 -0.67
Obs. 1025 864 161 1025 803 222 1025
210
Tenure -0.144** -0.145**
(0.0662) (0.0660)
ShortTenure (<=3) 0.692** 0.695**
(0.311) (0.312)
Big4 -1.317*** -1.316*** -1.310*** -1.310***
(0.298) (0.299) (0.298) (0.299)
LnSize 5.61e-05 5.60e-05 5.54e-05 5.53e-05
(4.34e-05) (4.34e-05) (4.40e-05) (4.40e-05)
Lev 0.166* 0.166* 0.180* 0.181*
(0.0947) (0.0948) (0.0946) (0.0946)
LnAge -0.234 -0.228 -0.252 -0.246
(0.230) (0.231) (0.228) (0.228)
Zmjwski 2.760* 2.772* 3.019* 3.028*
(1.632) (1.633) (1.630) (1.629)
Roa 0.0815 0.0814 0.0937 0.0935
(0.0767) (0.0768) (0.0766) (0.0766)
Year Dummies Yes Yes Yes Yes
Sector Dummies Yes Yes Yes Yes
Constant -13.40* -13.48* -15.40** -15.47**
(7.096) (7.103) (7.146) (7.144)
Observations 1,025 1,025 1,025 1,025
211
Effect of Industry 4.0 on Internal Audit / Dr. Bilal Zafer BERİKOL
Dr. Bilal Zafer BERİKOL
Abstract
The world has experienced many technological transformations within the past 30 years. With these
transformations, there has been a tendency for radical change to emerge in the basic characteristics of
the societies in advanced industrialized countries. First introduced by the German government to
promote the computerization of manufacturing, the term Industry 4.0 refers to a fourth industrial
revolution. The first industrial revolution (1.0) involved the mechanization of production using water
and steam power. The second industrial revolution (2.0) then introduced mass production with the help
of electric power, followed by the third industrial revolution (3.0), which has been a digital revolution
involving the use of electronics and IT to further automate production. The fourth industrial revolution
(4.0), which has only recently started, features the integration of digital and physical systems. This
current trend includes the smart use of internet technology in manufacturing and the ways in which
this use can incorporate various innovations in the future. In this data-generating environment, it is
important for internal auditors – as for all segments- to have quick access to data and to be able to
analyze accurate, necessary information among the big data. Internal auditing is not limited to
accounting alone in the new Industry 4.0 age, but rather serves as a useful instrument to pursue an
organization’s objectives and as a reliable consultancy service for all shareholders in every division,
including the cyber security unit of an organization.
Keywords: Internal Audit, Industry 4.0, Industrial Revolution
Çukurova University, [email protected]
212
Independent Audit in Capital Companies in the Context of Turkish Commercial Code /
Dr. Mehmet Ali AKSOY – Assoc. Prof. Dr. Emine Ebru AKSOY
Dr. Mehmet Ali AKSOY
Assoc. Prof. Dr. Emine Ebru AKSOY
Abstract
With the entry into force of Turkish Commercial Code numbered 6102, internal auditing system not
based on expert was quitted, instead of it, independent external auditing of company with share capital
was accepted (Kendigelen, 2012, p 287). In the independent auditing system, audit is fulfilled by
independent external auditing, not any organ formed into a company (Tekinalp, 2013, p. 418;
Özkorkut, 2013. P. 36) and performed it based on accounting records.
In this study, provisions of Turkish Commercial Code regarding auditing and applicability and
Regulation on Independent Auditing was examined comparatively. In this context, auditing principles
taking part in Turkish Commercial Code regulations and bearing mandatory qualification also with
regard to Public Oversight Authority was referred, additionally findings and results stated below were
obtained.
Although bookkeeping focused on tax was accepted (ÖZKORKUT, 2014,p. 122, 123) and, Turkish
Accounting Standards application liability was devoted to regulate financial statements as several and
consolidated in Turkish Commercial Code, auditing system was founded on Turkish Accounting
Standards.
Pursuant to Turkish Commercial Code and Statutory Decree No. 660, the subject of auditing is
composed of financial statements of the company, company’s inventory and accounting, committee
report of predetermination of risk, annual activity reports of board of managers. Annual activity
reports of board are examined as only whether financial information is consistent with audited
statements and whether reflect real or not (Turkish Commercial Code, Article 397).
Gazi University, College of Land Registry, Commercial Law Department
Gazi University Faculty of Economics and Administrative Sciences, Department of Business Administration
213
A part of company of share capital was subject to independent auditing1; remaining part was subject
to auditor auditing (Turkish Commercial Code Article 397/5). Auditor auditing has also independent
nature (Tekinalp, 2013, 418, For opposite idea, see, Arı and Karahan, 2013, p. 443). By means of
regulation, limited partnerships with share were subject to auditor auditing (Turkish Commercial
Code, Article 565), limited companies standing outside the scope of independent auditing were left as
uncontrolled in a way of open to criticism (AKSOY, 2016, s 166).
While Turkish Accounting Standards were obligatory for a part of aforementioned company with
share capital, for some companies the implementation is left to the company's discretion2.Therefore,
subjecting to independent auditing of company, it doesn’t mean that company apply Turkish
Accounting Standards. Elimination of the inseparable link between being subject to independent
auditing under the regulation and obligation to implement the Turkish Accounting Standards is
criticized in the doctrine. (Altaş, 2015, p. 133) . Companies that have not obligatory Turkish
Accounting Standards application if they wish will apply Turkish Accounting Standards and if they
wish, will continue3 to apply uniform accounting system until board of Public Oversight Authority
makes determination2. As procedures and principles concerning auditing aren’t still determined,
relating companies are virtually out of control. (Arslan, 2016, p. 134).
Auditor is selected for each activity period by general assembly of company. Also, first auditors in
joint stock companies need to be selected by general assembly. First auditors in limited partnerships
are assigned by means of main agreement. Together with selecting auditor by general assembly in
reality, there are available incidental circumstances that auditor is assigned by court, Minister or
Saving Deposit Insurance Fund Board (Turkish Commercial Code Article 399/6) or board of managers
(Turkish Commercial Code Article 399/9).
Auditor explains results of auditing by means of several reports. Results of auditing are explained with
opinion letter by auditor. But, letters of opinion were arranged as a part or result of any auditing report
as illegal in Forming Opinion Concerning Statements and Informing Reports (Altaş, 2015, p. 206).
Letters of opinion may be ways of limited positive, avoiding to issue an opinion and issuing negative
opinion. In Turkish Law, expression of ‘’pursuant to Turkish Accounting Standards and … within the
frame, any illegal circumstances weren’t encountered’’ taking part in the article 403/1 of Turkish
Commercial Code, against all company with share capital wasn’t enjoined to apply Turkish
Accounting Standards need to be perceived that any illegal circumstance wasn’t encountered ‘’within
the frame of applicable financial reporting’’. In addition, if limited opinion is issued, making decision
authority of arrangements is given to general assembly (Turkish Commercial Code, Article 403/5).
This authority of general assembly need to be used in ordinary meeting of general assembly. It is clear
that aforementioned provision will retard necessary arrangements.
214
In terms of auditing reports, Regulation on Independent Auditing contains in contradictions to
provisions of Turkish Commercial Code. For example, only item which criteria was searched to give
limited positive opinion of Turkish Commercial Code ‘’effects of contradictions on result explained in
the tables are not extensive and huge’’ was taken part but there was no ‘’statements include
contradictions that can be arranged by authorized institutions’’.
Independent auditing activity is carried out within the scope of agreement of signed between
independent auditing company and audited company. Although this, creditors and shareholders were
accepted as addressee of report and these persons were protected by special responsibility regime
(ÇELİK, 2005, 61,62). And also, while responsibility of auditor, whose organ qualification wasn’t
accepted, needed to be evaluated within auditing agreement, resolution (unless otherwise specified on
resolution) of general assembly regarding confirmation of balance sheet that will result in
acquaintance of auditors was arranged (Turkish Commercial Code, Article 424) (KIRCA/ ŞEHRİALİ/
MANAVGAT, p. 394).organization.
Footnotes:
1. By the enter into force 2012/4213 numbered (RG T, 23/01/2013 S, 28537) Council of Minister’s
Decision, specified companies are subject to independent auditing.
2. 75935942-050.01.04 – [01/26] Numbered Decision of Public Oversight Authority TG, T,
26.08.2014, S, 29100.
3. For this purpose, Local Financial Reporting Frame Draft was prepared by Public Oversight
Authority in 2015.
4. There is Turkish Accounting Standards application obligation in the 88. article of Turkish
Commercial Code. Therefore, it is open to criticism subject that Public Oversight Authority leave
the obligation of compliance with Turkish Accounting Standards and determine frame of
financial reporting that will be applied.
5. Public Oversight Authority Decision Date. 21/8/2014, S.75935942-050.01.04 – [01/26], RG T.
26.08.2014, S. 29100. Additional matters were searched for companies that apply uniform
accounting system by Public Oversight Authority; for this purpose; “Additional Matters which
will be applied for preparation of Financial Tables of Companies which don’t apply Turkish
Accounting Standards” was published. RG, T. 30.12.2014; S. 29221.
6. Upon opinion request of İstanbul Turkish Accounting Standards, Ministry of Customs and Trade,
Directorate of General of Domestic Trade gave opinion that companies not bearing specifications
regarding audit will not make registration authorized persons by Public Oversight Authority
(Ministry of Customs and Trade, Directorate of General of Domestic Trade, 2017) Opposite idea
(Arslan, 2016, p. 137).
Keywords: Audit, Turkish Commercial Code, Capital Companies
215
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