53
magazine
ALRAQABA
some expenses as assets.
- Manipulation of sold cost assessment pol-
icy.
- Non-reconciliation of the provided reve-
nues.
2- Manipulation of some expenditures, as well
as to their carrying over to another later or
early periods or transferring expenses based
on personal assessment of current account-
ing period.
3- Inflate some accounts e.g. profits, current
assets and equity through concealing the ac-
counts receivable and bad accounts.
4- Inflate the sales and profits through sales
inclusion of unconfirmed sales contracts.
5- Manipulation of the inventory turnover
though unusual inventory reduction.
6- Innovative Accounting can be used to sup-
port and strengthen the financial position. This
could be done through the utilization of vari-
ous methods such as: delaying the suppliers
due payments and attaining credit facilities, as
well as to collecting advance /down-payments
from customers.
Factors that would enable the creation, and
increase the use of innovative accounting are
shown in the following diagram:
II: Innovative Accounting & Work Quality
Due to the importance of audit quality, the In-
ternational Federation of Accountants issued
the Audit Quality Framework, since innova-
tive accounting starts threatening the quality
of the work, as it affects the decisions and
reports. The Quality Framework explains the
significance of creating a work friendly envi-
ronment that would restrict the use of inno-
vative accounting methods, despite the lack
of a defined mechanism to assure the quality
of the audit work in accordance to the Quality
Framework.
Quality Audit contributes in detecting innova-
tive accounting, restricting its utilization and
enhancing the quality of the supervisory out-
puts. Therefore, the International Federation
of Accountants encourages auditors to con-
duct quality audits in a continuous manner
b y
the use of the quality framework. In
order to enable auditors of per-
forming the quality audits to
detect innovative accounting
methods, a proper work envi-
ronment shall be established.
The said environment would en-
able the application of the quality framework
on various institutions regardless of their size
and work nature.
The Audit Quality Framework
Key elements of the Audit Quality Frame-
work:
Inputs:
Auditors are the key element and
are largely relied on; therefore, they must be
persons of high professional ethics, great ef-
ficiency and experience alongside with pos-
sessing the sufficient information that would
enable them of performing the assigned tasks
and having a knowledge of the innovative ac-
counting methods.
Processes:
Audit quality obliges the auditor to
perform extensive reviews, as well as to ad-
here to certain standards and laws that would
enable the detection of several cases of inno-
vative accounting utilization.
Outputs:
outputs includes reports and the de-
tection of fraud cases by the assigned audi-
tors.
III: Innovative Accounting and the Audit Pro-
fession
Auditing is a key factor in eliminating the in-
novative accounting phenomenon, as it helps
in reducing the misunderstanding between
the top management and the investors. On
the other hand, auditing relies on the auditor’s
abilities and capabilities to detect cases of
fraud and manipulation, as well as to restrict
the innovative accounting methods. Many
studies have proven that the audit profession
is closely related to detecting cases of inno-
vative accounting, however the auditor`s “ef-
ficiency” is the most significant factor in de-
tecting the said cases. The auditor`s abilities
greatly relies on the experiences, acquired
