Accountancy

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Audit Expectation Gap: A Comparative Literature Analysis of Private Sector and Public Sector
(Department of Business Management Wayamba University of Sri Lanka, 2023) Deepal, A.G.; Jayamaha, A.
The Audit Expectation Gap (AEG) issues are steadily expanding around the globe, irrespective of the particular sector involved. A comparative analysis will be more crucial for the AEG literature since the significance of the expectation concerns stems from the concepts of "stewardship and public accountability", which are applicable to audits in both private and public sectors. Thus, the purpose of this study is to analyze the similarities and distinctions between the AEG studies conducted pertaining to the private and public sectors. This research is directed by theoretical considerations and arrives at conclusions based on the extant literature. An exhaustive search of the published literature was conducted by applying the search terms “expectation gap” and “audit expectation gap” combined with “public sector”, “government sector” and “performance audit” in the Google Scholar search engine and three databases of Scopus, Jstor, and Emerald were performed separately and independently for each sector from 1970 to 2022. Thus, only the articles published in reputable journals concerning the AEG were selected after applying some selection criteria. It was found that the research contexts, selected target populations, and the dimensions applied to assess AEG were found to be significantly different, despite the fact that the definitions and statistical techniques used were found to be comparable in both sectors. This comparison study opens up a wealth of doors for conducting further research in the future.
Audit Quality: Perception of Audit Practitioners in Sri Lanka
(17th International Conference on Business Management (ICBM 2020), Colombo, Sri Lanka, 2020) Perera, Prabath; Wijerathna, A.G.H.S.K.
The quality of the audit plays an important role in the financial markets as a factor which creates the investor confidence is auditor’s opinion on the financial statements. Number of companies collapsed globally and as well as locally as a result of allegations made by employees of those companies. However, the audit report of these companies did not address any problems which were existed in the companies. Therefore, it is questionable whether the quality of audits is achieved. A standardized audit quality framework does not exist in Sri Lanka to measure audit quality. The Institute of Chartered Accountants of Sri Lanka (ICASL) has issued Sri Lanka Standard on Quality Control (SLSQC) to maintain the audit quality in Sri Lanka. However, it is not sufficient to measure the audit quality. In most of the developed countries, a separate audit quality framework exists as a guide to measure the audit quality. In the absence of such a framework, this study is aimed at examining the perception of junior level auditors on the audit quality indicators and how they prioritize audit quality indicators in order to enhance the audit quality. In order to achieve this objective, a questionnaire was developed and distributed among 120 junior-level auditors who work at Audit Firms in Sri Lanka. A total of 76 responses were able to obtain. The data was analysed using descriptive statistics. As per the results of this study, the factor which has a significant effect on the audit quality is the mental/ psychical status of the auditor. Moreover, the results also suggest audit engagements carried out based on the ethical standard rather than based on the legal standard has an effect on increasing the quality of the audits performed. Further, the perception of the junior level auditors differs based on the gender, academic qualifications and position in the firm for certain audit quality indicators. Based on the results of this study it can be recommended to adopt a new audit quality framework by the government relevant governing bodies to enhance the audit quality in Sri Lanka.
Auditors' response to regulators during COVID-19: disclosures of key audit matters
(Asian Review of Accounting, 2023) Rainsbury, E.; Bandara, S.; Perera, A.
Purpose New Zealand regulatory bodies guided preparers and auditors of financial statements to deal with potential COVID-19 impacts on the financial statements and audit procedures. This study provides evidence of auditors' response to the impact of COVID-19 on the reporting of key audit matters (KAMs) in audit reports of listed companies in New Zealand. The purpose of this paper is to address this issue. Design/methodology/approach A sample of 50 New Zealand listed companies was selected to compare the KAMs in 2019 (pre-COVID-19) and 2020 (during COVID-19). The study uses content analysis to evaluate the KAMs’ disclosures and descriptive analysis to examine the differences between 2019 and 2020 in terms of the auditor type, industry sector and accounting standards. Findings Auditors responded positively to the request from regulators to communicate the impacts of COVID-19. The findings show an increase in the amount and length of KAMs in 2020 compared to 2019, with 82% of companies and 61% of KAMs reporting the impact of COVID-19. The real estate and information technology sectors disclosed more on the impact than other sectors. In analysing the KAMs, accounting standards for inventories, property plant and equipment, impairment of assets, investment property, revenue from contracts with customers and leases were highly affected by COVID-19. Practical implications The findings support regulators to evaluate how well auditors communicated matters relating to COVID-19 in the audit report. Also, the findings will help standard setters to identify key accounting standards affected by COVID-19 of KAMs and provide insights to users on how the KAM reporting enhances communicative value during the pandemic. Originality/value The current study captures the impact of COVID-19 on the reporting of KAMs by comparing changes before and during the pandemic.
Best financial practices analysis and efficiency of small financial institutions: Evidence from cooperative rural banks in Sri Lanka
(2011) Jayamaha, A.; Mula, J.M.
Many small financial institutions (SFIs) in developing countries make great effort to provide efficient services to poor house holders. It is generally accepted that maintaining the best financial practices which are of importance in corporate governance mechanism of institutions, has a close relationship with the efficiency of financial institutions, although they are small. This paper seeks to test best financial practices of cooperative rural banks in Sri Lanka (CRBs) and whether these practices have a significant impact on the efficiency of these institutions. The financial practices of CRBs was assessed using ratios of capital adequacy, liquidity, asset quality, loan to deposit, profitability, loan portfolio yield, operational efficiency, and operational self-sufficiency. The efficiency of CRBs in Sri Lanka was examined by using Data Envelopment Analysis (DEA). Based on the data extracted from CRBs’ financial statements, correlation coefficients showed that several ratios have significant associations with the efficiency of CRBs. This confirms that efficient CRBs maintain best financial practices which contribute to their higher levels of efficiency.
Budgetary process and organizational performance of apparel industry in Sri Lanka
(2012) Silva, L.M.D.; Jayamaha, A.
The budgetary process has been a part of management control system of the organization. This process encourages managers to plan, consider the stakeholders involved, provides information for improved decision making, increases and enhances communication and coordination among departments, and for evaluation. This paper seeks to evaluate budgetary process of apparel industry in Sri Lanka (BPA) and see whether budgetary process has significant impact on performance of such industry. The budgetary process of apparel industry was assessed by using variables such as planning, coordination, control, communication and evaluation. The performance of apparel industry in Sri Lanka was examined by using Return on Assets. Based on the data extracted from apparel industry’s financial statements, correlation coefficients and regression analysis showed that budgetary process have significant associations with the organizational performance of apparel industry in Sri Lanka. This confirms that efficient apparel companies maintain sound budgetary process which contributes to higher levels of organizational performance.
Capital Structure and Profitability: An Empirical Analysis of SMEs in the UK
(2015) Abeywardhana, D.K.Y.
This study examines the relationship between capital structure and the profitability of non- financial SMEs in the UK for the period of 1998-2008. Using the Two Stage Least Squares, (2SLS) the results show a significant relationship with capital structure and profitability which is negatively related. The size of the firm appears a more important factor that determines the profitability in SMEs in the UK. There is consistent evidence for positive size- profitability relationship. The results of this study have shown that the capital structure of the firm has a significant influence on the profitability of SMEs in the UK. Especially, long-term debt to total assets ratio is negatively related with the profitability and this is an indication that SMEs are averse to use more equity because of the fear of losing the control.
Challenges and Barriers to Digital Transformation in Sri Lankan Government Organisations: Managers’ Perceptions
(Faculty of Management Studies and Commerce, University of Sri Jayewardenepura, Sri Lanka., 2025) Aruppala, D.; Gunawardana, K.; Razi, M. J. M.
Despite facing significant challenges, the Sri Lankan government actively supports digitising its organisations, recognising its potential to enhance governance, optimise operations, and improve citizen services. This study investigates the key challenges and barriers hindering the effective implementation and adoption of digital transformation in Sri Lankan government organisations. This research analyses the perspectives of 147 managers working on digital transformation projects and information technology departments at different government organisations. Data is collected using a structured survey questionnaire, and analysed through SPSS, employing demographic analysis and frequency analysis to identify significant challenges and barriers. The study employed the Technology, Organisation, and Environment (TOE) framework, to categorise technological, organisational, and environmental factors that hinder digital transformation in the public sector. The findings reveal inadequate communication, high costs, insufficient digital skills, employee resistance, absence of a digital-centric organisational culture, system integration issues and insufficient regulatory frameworks as main barriers to digital transformation. However, despite all the challenges managers hold a largely positive view on digital transformation by acknowledging improvements in organisational efficiency and effectiveness. Managing these challenges, Sri Lankan government organisations can leverage emerging technologies to enhance public sector efficiency and productivity, to achieve sustainable digital transformation ultimately driving operational excellence.
Challenges of, and techniques for, materiality determination of nonfinancial information used by integrated report preparers
(Meditari Accountancy Research, 2022) Lakshan, A.; Low, M.; de Villiers, C.
Purpose – The international integrated reporting framework encourages organisations to disclose material information that affects their ability to create value. This paper aims to investigate the challenges and techniques preparers of integrated reports use to determine the materiality of non-financial information. Design/methodology/approach – This paper uses an exploratory interpretive thematic analysis and an archival research approach. Qualitative semi-structured interviews were conducted with 55 integrated reporting (IR) preparers in 12 publicly listed companies, supported by the perusal of the companies’ integrated annual reports over a three-year period. Findings – IR preparers findmateriality determination for non-financial information challenging. This study found that preparers convert challenges into opportunities by using materiality disclosures as image-enhancing marketing tools, which causes concerns regarding weak accountability and a deviation from the International Integrated Reporting Council’s objective of improving information quality. This study found that IR preparers use various techniques in conjunction to determine materiality levels, as well as whether to disclose non-financial information in their integrated reports. The institutional isomorphismlens used in the study highlighted the issues IR preparers faced in their determined efforts of IRmateriality levels undermimetic and normative isomorphismpressures. Research limitations/implications – The challenges and techniques identified can contribute to the development of a framework for materiality level determination for non-financial information. Practical implications – Regulators who are concerned with ensuring sufficient information to improve investor decision-making will be interested in the techniques IR preparers use to determine materiality levels for non-financial information, to improve their regulations and frameworks. Originality/value – This study contributes to the literature regarding challenges with materiality level determination in integrated reports and techniques used by IR preparers. The application of an institutional isomorphism lens led to greater insight and understanding of IR preparers’ challenges and techniques in materiality determination. This paper makes a number of significant contributions to the IR literature. First, it identifies the usefulness of material information for decision-making and the influence stakeholders have on the materiality determination of non-financial information, which have not been mentioned in the prior literature. Second, the literature is silent on how organisations relate materiality to value creation for the purposes of determining the materiality content of an integrated report; this research provides empirical evidence of the use of value creation criteria in materiality determination. Third, the study highlights that materiality is a combination of efforts that involves everyone in an organisation. Further, the strategy should be linked to IR and preparers have indicated that integrated thinking is required for materiality determination.
Change Driven to Success Case Study on Screenline Holdings (Pvt) Ltd, Sri Lanka
(Staff Development Unit, Faculty of Commerce & Management Studies, University of Kelaniya, 2015) Rathnasiri, U.A.H.A.; Rajapakse, R.M.D.A.P.; Perera, H.A.P.L.; Aruppala, W.D.N.; Kaushalya, M.D.P.; Thilakarathna, W.D.N.; de Silva, N.M.T.; Kumara, N.
Our desire in writing Change Driven to success was to provide faculty with a developed teaching package that allows them to enhance students’ learning and application of knowledge in business management. Appropriate use of theory and the acquisition of factual content and analytical skills are also important goals, but the main objective is to improve the ability of handling different types of managerial problems and opportunities intelligently. This case study book depicts a wide range of business management applications specially focusing on Entrepreneurship Development, Strategic Management, Management and Financial Management etc. Sufficient information is given in each module to support students in analyzing and decision making. The Change Driven to success reflects on the identified structural change in Screenline Holdings (Pvt) Ltd. which is one of the Sri Lanka’s largest screen printers and embellishers. This book comprises with five modules and each module ends with a contribution to practice to assist students in combining theoretical aspects with emerging workplace realities. This case study book submitted in partial fulfilment of the requirement for Staff Development Programme, Faculty of Commerce and Management Studies, University of Kelaniya conducted for Probationary and Assistant Lecturers.
Corporate governance and corporate failure
(2012) Lakshan, A.M.I.; Wijekoon, N.
The purpose of this research is to examine the influence of corporate governance characteristics on the corporate failure of listed companies in Sri Lanka. This study utilized publicly available data from annual reports of a sample of 70 failed firms and a sample of matched 70 non failed firms listed on Colombo stock market for a period covering the 2002 to 2008 financial years with logistic regression analysis. Corporate governance characteristics comprises with board size, CEO duality, outside directors, outsiders’ ownership, audit opinion, presence of an audit committee and remuneration of board members. Outside director ratio, presence of an audit committee and remuneration of board members turn out to be negatively associated with the probability of corporate failure, While CEO duality is positively related with the likelihood of corporate failure. Board size, auditor's opinion and outside ownership do not appear to be significant determinants. The paper offers evidence on the extent to which corporate failure associated with corporate governance. It would be educational to investors, financial analysts, accounting professionals, management and be helpful for regulatory authorities in making decisions, evaluations and policies.
Current Context of Using Derivatives as Risk Management Technique of Sri Lankan Listed Companies
(International Journal of Business and General Management (IJBGM), 2013) Thilakarathna, P.M.C.; Abeyratna, N.I.
Risk management has become a vital part of businesses all over the world and firms adopted various risk management techniques to manage risk. This study examines derivatives use in randomly selected 94 listed companies in the Colombo Stock Exchange (CSE), Sri Lanka representing four industry sectors. We find that 41% of the selected firms used derivatives. When we analyze different industry sectors Banking, Finance and Insurance sector recorded fairly low percentage (36%) of using derivatives. In contrast to this Diversified holding companies depicts highest percentage (71%) of derivatives usage. Developed derivatives market yet to be emerged in Sri Lanka and however, there is an increasing trend of using derivatives by Sri Lankan companies. Size of the company has an impact of using derivative instruments. Interest rate swaps, currency swaps and forward exchange contracts mainly used to manage risks in Sri Lankan companies.
Determinants of Academic Performance of Accounting Undergraduates
(University of Portsmouth, United Kingdom, 2007) Ranjani, R.P.C.; Karuanarathne, W.V.A.D.; Weligamage, S.S.
Determinants of group cohesiveness in military units in Sri Lanka
(Sabaragamuwa University of Sri Lanka, 2006) Gunasekere, U.L.T.P.
Does culture impact on Social networks of ethnic, small business entrepreneurs?
(2011) Madurapperuma, M.W.
This paper examines ethnic entrepreneurship in Sri Lanka and the UK by investigating the relationship between the characteristics of ethnic business entrepreneurs and their entrepreneurial experiences. What is worth noting in this study is comparative perspective of composition of networks across cultures. The research will discuss the key themes such as the extent to which ethnic (immigrant) entrepreneurs are embedded in networks. These results have the potential to be generalisable to other similar context, for example South Asians in the US, Canada and Western Europe.
Economic Value Added (EVA) Disclosure Practices of Sri Lankan Listed Companies
(Journal of Finance and Accounting, 2015) Thilakerathne, P.M.C.
Transparency, disclosures and information sharing with stakeholders, command a considerable degree of value to the accompanying financial statements of any corporate or business enterprise. Investors and stakeholders are increasingly looking at the performance of companies which they have invested their hard earned funds. To meet such expectations, good governed companies do adopt practices which add to enhance the value of financial statements and value to its readers. The ideas of free cash flow and the evaluation of business on a cash basis developed by Modiglaini and Miller (1961) were extended into the concept of the Economic Value Added (EVA) (Stewart and Stern 1971). The traditional financial performance measures have not presented the real shareholder value of an enterprise. Thus, the EVA is one of main evaluation criteria of companies’ commitment with shareholder value maximization. In this context, this research investigated the EVA disclosures in the annual reports of Sri Lankan listed companies. Analyzing annual reports of Sri Lankan largest 85 listed companies over a period of 5 years from 2009 to 2013, the results indicated that 15 numbers of listed companies, as a percentage of 17.65 of the sample disclosed the EVA statement in their annual reports. The study further explored the industry composition, residential status, medium of disclosure, areas of EVA application and extent of EVA related computation prepared and disclosed by EVA reporting companies. Univariate analysis was used to identify the extent of EVA disclosures of listed companies in Sri Lanka and it was found that, existence of significant inconsistencies and irregularities in measurement of EVA and its major components of EVA reporting listed companies. The second part of the study explored that the corporate attributes such as back ground information and financial performance indicators of companies are influenced to the choice of EVA disclosure. Therefore, research performed a comparison of differences between EVA reporting and EVA non reporting listed companies on the basis of their background indicators and financial performance measures. Research employed the two independent sample t-tests to identify the factors influencing to EVA usage and disclosure choice of Sri Lankan listed companies in terms of company size, profitability, leverage etc. Research finds that the EVA usage and EVA disclosure choice of Sri Lankan companies are influenced by the company size, leverage and earnings potential. Further, the study recommends the importance of implementing EVA disclosures as a mandatory requirement for Sri Lankan listed companies.
EFFECT OF DISCRETIONARY ACCRUALS ON FIRM’S CORPORATE DIVIDEND POLICY - EVIDENCE FROM SRI LANKA
(3rd International Symposium on Social Sciences and Humanities 2020 , Colombo, Sri Lanka, 2020) Lakshan, R.P.S.; Perera, Prabath
Earnings management is becoming an area of interest to many stakeholders including researchers, after several accounting scandals. Also, it is an important duty of a financial manager to formulate the company's dividend policy that is in the best interest of the company. The study aims to identify the impact of earning management measured through discretionary accruals on dividend policy of listed companies in Sri Lanka. The study uses annual data of 57 non-financial companies listed in Colombo stock exchange representing five sectors based on highest market capitalization during the period from 2015 to 2018. Discretionary accruals (DA) were used as a proxy for earnings management which is obtained from cross-sectional modified Jones (1995) model while dividend payout ratio is taken as a proxy for dividend policy. Firm Debt (DEBT), Liquidity (LIQ), Operating Cash Flows (CFO), Return on Equity (ROE) and firm Size (SIZE) have been introduced as control variables to make model strongest. The data were analyzed using correlation and regression analysis. The results reveal that discretionary accruals have negative impact on the dividend payout policy of Sri Lankan companies listed in the Colombo Stock Exchange. In addition to that LIQ, ROE, CFO show positive significant impact on the dividend payout while DEBT shows insignificant impact on the dividend payout policy of Sri Lankan Companies. In an environment whose reported earnings are viewed with some extent of skepticism, cash dividends will provide a strong signal to investors of true financial strength and of the credibility of earnings reports.
The Effects of Occupational Stress on the Job Performance of Police Officers in Sri Lanka
(Srusti Management Review, 2023) Ratnayake, S.B.D.C.; Gunasekara, U.L.T.P.
Stress is common and general among the people in the world. It is experienced by every person physically and mentally in their day-to-day life. Hence, Policing is widely considered to be one of the most stressful occupations, wherein organizational and operational stressors put law enforcement officer’s physical and mental health at risk. Occupational stress badly affects performance, and many studies revealed that the level of stress experienced differs with the type of job. Accordingly, this research paper demonstrates how Police Officers experienced occupational stress and its impact on their performance. This study is a mixed method study using quantitative data gathered from a questionnaire and qualitative data from five in-depth interviews. A sample of 110 police officers from other ranks was taken from the central province of Sri Lanka. Findings showed that lack of resources mainly influenced police performance. In contrast with previous empirical work, the findings demonstrate that operational issues and less career growth have an adverse influence on police performance. This study has drawn the linkage between organizational stressors, operational stressors and police performance of other rank officers in the Sri Lanka context. This research was based on the data of central province officers only is a limitation. Also, the findings are limited to the other ranking officers and therefore future research directions could be focused to the inspectorate officers, senior gazetted officers.
Efficiency of small financial institutions in Sri Lanka using data envelopment analysis
(2012) Jayamaha, A.
In Sri Lanka, the formal rural financial sector comprises a large number of small financial institutions (SFIs). Among SFIs, cooperative rural banks (CRBs) play an important role in meeting the rural credit needs in rural sector in Sri Lanka. CRBs have gained an increasing share of financial assets, which has been particularly helpful for satisfying the growing demand for loans and advances in poor people in the country. However, performance of SFIs in Sri Lanka is less than satisfactory and highly criticised today. Poor performance has been attributed to poor management of assets and consequently, the sustainability of these institutions is uncertain. Moreover, an attention to the efficiency of SFIs in Sri Lanka is more concern to the general public given collapses of several formal and informal SFIs. Hence, aim of this study is to evaluate the overall efficiency of SFIs in Sri Lanka by taking all CRBs operate in Sri Lanka. CRBs established in 1964 and end of 2010 there are 1,933 branches operate in all 25 districts of the country. Data envelopment analysis (DEA) is used to measure efficiency. The study found that the efficiency of CRBs in Sri Lanka have declined during the study period of 2005 to 2010. Further found that there were significant differences in the efficiency of CRBs by geographical locations and the efficient banks are closely associated with size of the Banks. The findings of this study may convince industry decision makers to establish more comprehensive policy settings for promoting particularly, CRBs activities, and overall all SFIs in Sri Lanka’s rural financial sector.
Emotional Stability: from the Buddhism Lens
(2015) Gunasekare, U.L.T.P.; Dissanayaka, D.R.
An Empirical Study of Herzberg’s Two Factor Theory with Operational Level Employees of Private Banks in Sri Lanka
(2011) Gunasekare, U.L.T.P.; Kulathunga, K.M.K.N.S.