The Impact of Financial Crises on the Trust of Financial Statements Users

in the Accounting Profession in Kuwait: Causes, Impacts and Solutions

444014454

t . test
(One way Anova

t . test
(One way Anova

t . test
(One way Anova

Abstract
The Impact of Financial Crises on the Trust of Financial
Statements Users in the Accounting Profession in Kuwait:
Causes, Impacts and Solutions
Prepared by
Manna Al-ajami
Supervised By
Dr. Thaher Alqashi
This study aimed to identify the impact of financial crises on the trust
of financial statement users in the accounting profession in Kuwait
via indicating the causes leaded to trust dilemma, its impact and
suggesting proper solutions to gain the trust back.
To achieve these objectives, the researcher chooses (180) companies
listed in Kuwait stock Exchange, and arranged a specialized
questionnaire, and distributed the same to the sample of the study,
which consists of 298 questionnaires, covering three categories; the
financial managers, investors, and external auditors.
The study has come up with many results, the most important of
which are that:
The study came up with the following findings:
1. The study sample agreed that there are reasons led to the
decline of the financial statements users trust in the accounting
profession during the global financial crises such as the
increasing suspicion in the financial staff of the listed
companies, and in the regulating bodies too.
2. The study sample agreed that there will be future impact due
the decline of the financial statements users trust in the
accounting profession such as a rise in poverty and
unemployment, and decline in economic growth due to oil
price fluctuation.

3. The study sample agreed that there are appropriate solutions

can restore the trust of the financial users in the accounting
profession such as activation of modern concept of corporate
governance, and issuing and activating Islamic ethical
standards.
The study also provided the following recommendations:
1. Continue applying international financial reporting standards
that are related to fair value, and reconsider the assessment
methods involved in fair value accounting.
2. Activating the control system of regulators in the financial
market upon the listed companies in more effectively way.
3. Issuing and activating Islamic ethical standards and linking it to
the modern corporate governance concepts

(Rezaee,2009, p:134)

11

11

12

(Rezaee, 2009)

13

14

15

IFAC
IAASB

Clarity project

16

AICPA

Arens, 2010, p:111

17

Arens, 2010, p: 129

18

Arens, 2010, p:110

Arens, 2010, p:110

2 2

19

21

1999

21

2111

22

.(Delloitte & Sells,2006, p:21).

Relevance

23

(Timelines)

(Prediction Value)

(Feedback
Value)

24

Reliability

(Verifiability)

(Neutrality)

25

26

27

28

29

31

(Mardjono, 2005, p:272)

31

(Erkens, Hung Matos, 2009)

32

(Kanchel, 2007, p:740

Posner & Hopkins, 2009, p:52

Sharfman & Szydlowski, 2009

33

Claw backs

Forensic accountant

Pomerantz, Mohr, 2009

Anti-Fraud

fraud examiners
Program

34

Barlev &
Enron

Haddaol, 2003

35

Enron

AICPA
Trussel & Rose, 2009

(Halderman, 2006)

Re statement

write offs

36

price risk management assets

mark to market

risk of default

(Halderman, 2006, p:14)

37

(Benston, 2006, p:465)

38

39

Enron
Arthur Andersen

Corporate Governance

41

Arthur Andersen
Enron

41

42

43

44

2008

45

46

47

48

Ronen, 2006
A proposed corporate governance reform: Financial statements
insurance

49

(Rezaee, 2009)
Restoring public trust in the accounting profession by developing
anti-fraud education, programs, and auditing

51

Hooghiemstra and Van Manen (2009)

Supervisory Directors and Ethical Dilemmas: Exit or Voice?

51

52

53

54

55

56

5
2
6
18

57

58

59

61

12

61

62

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.
.

CISA

CMA

.
.

CPA

11

CIA

63

CPA
CFA
CMA

CISA
CIA

CPA
CFA
CMA

CISA

CPA
CIA

CFA
CMA
CFA

CISA

CFA
.

64

65

92.6

66

67

(SPSS

mean
Descriptive Statistics

Percentages

Frequencies

(One sample t- test) t-test

Anova

68

69

71

SPSS
(One sample t- t-test
t

test)

Ho
t
0.05

(Malhotra, 2003, p.503)

Descriptive Statistics

Anova

71

Ha

72

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.79865

3.7640

.93119

3. 528

.90297

3. 3 3

.93892

3.5

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3. 742

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3. 618

.89109

3. 697

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3. 7 9

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3.6404

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3.

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3. 6 0

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28

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3.

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3. 6 8

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90

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90

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3.7573

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3.5281

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3.8764

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3.764

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3.7528

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3.7303

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3.5618

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3.7079

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3.5618

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3.2697

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3.4494

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3.6404

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12

3.6515

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3.8485

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3.4556

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3.7640

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3
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78

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3.8030

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3.7727

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.
.

79

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3.6413

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3.5406

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3.6357

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3.6309

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11

3.8011

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3.6766

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3.605

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3.7022

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3.6175

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11

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3

3.7442
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3.7463

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3.5903

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3.6366

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82

.81460

3.6366

3.8011
3.7463
3.7442

3.7228
3.7022
3.6811
3.6766
3.6548
3.6413

83

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3.5618

16

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3.2697

15

.90297

3.4494

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3.4719

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3.6404

11

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3.5843

.88657

3.7727

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3.8030

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3.6364

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3.6515

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3.8485

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3. 5 5

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3.7727

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3. 69

13

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3. 49

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3.6497

1
4

84

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3.8575
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85

0.9081

3.8427

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0.8903

3.5 56

0.8182

3.8427

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3.7865

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3.8427

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3.6964
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3.7378
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92

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98

3.5527

( One Sample T. Test )

t . test
t

t
t

Sig-t
0.000
0.000
0.000

99

1.671

t
1.671

t
1.671
t

Sig.

(One way Anova

111

4
(One way Anova

Sig

.338

1.736

df

3.92

1.736

20.211

291

8.193

298

28.404

F
3.92
F

.338

111

( One Sample T. Test )

t . test
t

t
t

Sig-t
0.000
0.000
0.000

112

1.671

1.671

t
1.671
t

Sig.

(One way Anova

113

4
(One way Anova

Sig
.283

1.196

3.92

1.196

df
6

13.965

292

8.216

298

22.181

F
3.92
F

.283

114

( One Sample T. Test )

t . test
t

t
t

Sig-t
0.000
0.000
0.000

1.671

t
1.671

t
1.671
t

Sig.

115

(One way Anova

4
(One way Anova
F

Sig
.271

1.210

3.92

1.210

df
9

15.214

289

8.852

298

24.066

F
3.92
F

.271

116

117

118

119

111

111

112

113

 .)2445( .

114

on

line

available:
http://www.socpa.org.sa/rule/index.htm

1999

115

2001

116

117

118

- Benston George J, "Fair-value accounting: A cautionary, tale from

Enron", Journal of Accounting and Public Policy 25 (2006) 465
484

- Delloitte Haskins & Sells International,(2006). Accounting

Objectives & Concepts, Saudi Arabia, MOC,1406H, pages 21-23.

- Eichenseher, J. W. and Shields, D., (2003). The correlates of CPA

firm for puplicy- Held corporations, Journal Of Practice And
Theory, Spring, Volume 1. No.21 p.p23-37.

- Erkens D., M. Hung & P. Matos, (2009)" corporate Governance in

recent financial crisis: Evidence from Financial institutions world
wide", working paper, (April, 2009), from www. ssrn.com.

119

- Haldeman,

Robert G,( 2006)"Fact, Fiction, and fair value

accounting at Enron ", The CPA Journal; Nov; 76, 11;

ABI/INFORM Global, p: 14.

- Hooghiemstra, R. and van Manen, J. (200 ). Supervisory Directors

and Ethical Dilemmas: Exit or Voice? European Management
Journal Volume No, 20, P: 1-9.

- IFAC Education Committee, IES3: Professional Skills, (www. ifac.

org/ store/ category.tmpl? category=Education/,October, 2003.

- Joshua Ronen, (2006) A proposed corporate governance reform:

Financial statements insurance ,

Journal of Engineering and

Technology Management, Vo. 23, No. 1-2, Pp. 130-146.

- Khanchel, Imen, (2007). "Corporate governance measurement and

determinant analysis", Managerial Auditing Journal, Vol. 22 No. 8,
pp. 740-760.
- Pomerontz, G.M., T.L. Mohr, (2009). Opportunity in down turn :
The value of on Anti-Fraud Program, The Corporate Governance
Advisor, (Jan/Feb,2009).

- Randel J. Marks S. Alvin A. Arens, (2010). Auditing and Assurance

Services, 13ed. Wiley.

121

- Rezaee Z. (2009) " Restoring public trust in the accounting

profession by developing anti-fraud education, programs, and
auditing", Managerial Auditing Journal, Vo.19, No.1, pp.134-148.

- Robert W. McGee, (2007) " Corporate Governance in Russia: a case

Study of Timeliness of Financial Reporting in the Telecom Industrial
", International Finance Review, Vo.7, Pp.365-390.

- Sharfman, B. S., S. J. Toll & A. Szydlowsk, (2009)." Wall Street's

Corporate Governance Crisis", The Corporate Governance
Advisor, (Vol.17, No. 1) (Jan/Feb, 2009).
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and Sons Inc., New York.

- Trussel, John M., Rose Laura C., ( 2009)"Fair Value Accounting

and the Current Financial Crisis", The CPA Journal; Jun; 79, 6;
ABI/INFORM Global, p: 26.

121

122

CMA

CISA

CFA

CIA

CPA

123

124

125

126

One-Sample Statistics
Std. Error
Mean
.05825

Std. Deviation
.83415

Mean
3.611455

N
127

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.8764

Lower
3.2022

Mean
Difference
3.4697

Sig. (2-tailed)
.000

df
126

t
45.25

134

t
54.15

One-Sample Statistics
Std. Error
Mean
.05825

Std. Deviation
.86026

Mean

3.683265

135

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.8526

Lower
3.2890

Mean
Difference
3.2022

Sig. (2-tailed)
.000

127

df

One-Sample Statistics
Std. Error
Mean

Std. Deviation

.04867

.81321

Mean

3.77267

36

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.9545

Lower
3.2738

Mean
Difference
3.8500

Sig. (2-tailed)
.000

df

t
7.348

34

ANOVA

Sig.
.338

F
1.736

Mean Square

Sum of
Squares
20.211

Between Groups

.016

df
8

.223

291

8.193

Within Groups

298

28.404

Total

128

One-Sample Statistics
Std. Error
Mean
.05094

Std. Deviation
.82769

Mean
3.6497

N
721

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.2697

Lower
3.8575

Mean
Difference
3.7919

Sig. (2-tailed)
.000

df
126

t
34.26

One-Sample Statistics
Std. Error
Mean
.55721

Std. Deviation
.8163

Mean
3.7074

N
135

TO

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.8539

Lower
3.5056

Mean
Difference

Sig. (2-tailed)

3.7690

.000

129

df

t
134

25.37

TO

One-Sample Statistics
Std. Error
Mean
.65721

Std. Deviation
.8165

Mean
3.5526

N
36

TA

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.7888

Mean
Difference

Lower
3.1818

Sig. (2-tailed)

3.9447

df

.000

35

6.861

TA

ANOVA

Sig.
.283

F
1.196

df
6

Sum of
Squares
13.965

292

8.216

Within Groups

298

22.181

Total

Mean Square
.590
.257

Between Groups

One-Sample Statistics
Std. Error
Mean
.05721

Std. Deviation

Mean

.77974

3.7257

127

ALI

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.8933

Lower
3.4622

Mean
Difference
3.9447

Sig. (2-tailed)
.000

131

df
126

t
15.29

AL

One-Sample Statistics
Std. Error
Mean
.05490

Std. Deviation

Mean

.78084

3.6773

135

AL

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.7742

Mean
Difference
3.9854

Lower
3.6021

Sig. (2-tailed)
.000

df
134

t
24.18

AL

35

t
5.348

AL

One-Sample Statistics
Std. Error
Mean
.05214

Std. Deviation

Mean

.76278

3.7097

36

AL

One-Sample Test

Test Value = 0
95% Confidence Interval
of the Difference
Upper
3.8565

Lower
3.5527

Mean
Difference
3.8609

Sig. (2-tailed)
.000

df

ANOVA

Sig.
.271

F
1.210

1.816

df
9

Sum of
Squares
15.214

.321

289

8.852

Within Groups

298

24.066

Total

Mean Square

131

Between Groups

132