ICARE 2023

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Analysis of the Key Audit Matters and Revealing the Underlying Causes: Evidence Gather from Listed Banking and Insurance Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Sandaruwani, S.A.D.R.; Munasinghe, M.A.T.K.
Global financial scandals and crises have placed the auditor's role into greater attention, especially regarding the value of the data in audit reports. The traditional audit report is not adequate due to its standardized format, which is considered by financial stakeholders as uninformative. This perception caused the establishment of global audit standards. One of the most recent changes is that the International Auditing and Assurance Standards Board (IAASB) published ISA 701, which requires auditors to report "Key Audit Matters" (KAMs). In the Sri Lankan context, the Auditing standard was introduced as SLAuS 701. The primary objective of this study is to analyse the Key Audit Matters of both banking and insurance companies listed on the Colombo Stock Exchange (CSE) and to find the identifying the underlying root causes that may not be covered. In this research study analysed, KAMs identified in audit reports of both banking and insurance companies listed in CSE over the period of 2018 to 2022 using the content analysis method. According to the findings of the study, it can be identified that the majority of KAMs disclosed under the areas of impairment of financial instruments and information technology systems and controls over financial reporting in the banking sector and the area of insurance contract liabilities in the insurance sector. Based on the results of this study, it can be identified that the underlying root cause behind those disclosed KAMs was it represent a significant portion of a particular company’s financial position, and this amount was calculated mainly based on the assumptions and estimations. Therefore, there is a significant impact on the financial position of the company. This research study found different kinds of estimation methods and calculation methods as well.
Analyzing the Impact of Behavioral Biases on Stock Investment Decision Making: Evidence from Sri Lanka Individual Investors at CSE
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Dissanayake, S.; Perera, W.T.N.M.
The objective of this study is to analyze the impact & relative importance of several prominent behavioral finance variables covered by the behavioral financial literature (overconfidence, loss aversion, risk perception, and herding) on stock investment decision-making at the Colombo Stock Exchange (CSE). This study's significance stems from the fact that local studies focusing on behavioral finance are rare, and thus the researchers believe that such research will raise awareness in this domain. A total of 303 active individual investors who actively traded on the Colombo Stock Exchange during the research period were included in the study. Following authorization of the questionnaire's reliability and validity, data were collected using a Likert scale questionnaire and analyzed using descriptive statistical tests, factor analysis, correlation analysis, multiclonality test, and paired sample T-test using SPSS software. The findings revealed that behavioral finance observed variables have an impact on the Colombo Stock Exchange, as represented by four behavioral factors influencing individual investors' investment decisions: overconfidence, loss aversion, risk perception, and herding. According to the findings, the variables Risk perception and Loss aversion had the highest impact and relative significance on the individual investor's investment decision-making at CSE. The study made recommendations for CSE investors to use scientific bases when making stock investment decisions, as well as need further research on the impact of behavioral finance on the several types of risks and yields at CSE.
Assessing the Impact of Skills on the Effectiveness of Internal Audit: Empirical Evidence from Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Kavinda, S.J.M.I.; Sujeewa, G.M.M.
In the dominion of Sri Lankan audit practices, this research endeavors to dissect the elaborate interaction between professional, interpersonal, technical, and audit-specific skills and their influence on the effectiveness of internal audits. The study draws upon a diverse sample of 120 participants from varied sectors such as hotels, manufacturing, banking, and audit firms to precisely assess the connection between these skills and the effectiveness of internal audit functions. Utilizing a strong conceptual framework where these skills are suggested as independent variables and internal audit effectiveness as the dependent variable, the research crafts and empirically evaluates four hypotheses. These hypotheses scrutinize the extent to which internal auditors’ skills possess the necessary to influence audit functions effectively. Findings explain a significant positive correlation between professional factors and internal audit effectiveness. This underscores the paramount importance of cultivating and honing professional skills such as accounting expertise and regulatory acumen to bolster audit performance. The study explained a persuasive link between interpersonal skills, and technical and audit skills with internal audit effectiveness, highlighting the instrumental role of effective communication, team collaboration, and relationship-building capabilities in enhancing audit outcomes. The implications of these findings extend beyond theoretical dimensions and concrete the way for actionable recommendations. The study underscores the imperative for technical skill enhancement programs, continuous skill assessments, and cross-industry collaborations to fortify the skill arsenal of Sri Lankan internal auditors.
Behavioral Intention to Use Forensic Accounting Services for the Detection and Prevention of Frauds in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Nisansala, H.A.; Sujeewa, G.M.M.
This study investigates the factors that influence the behavioral intention to use forensic accounting services in the detection and prevention of fraud in Sri Lanka. The research was motivated by the underutilization of forensic accounting services, an essential and effective fraud detection and prevention method. The low usage of this service by companies in Sri Lanka and worldwide has been pointed out as a contributing factor in the escalation of fraud. The organizational intention to use professional services including forensic accounting services has not been researched previously. The study uses a quantitative approach to its research methodology. The Theory of Reasoned Action (TRA), Theory of Planned Behavior (TPB), Health Belief Model (HBM), and Hierarchy of Effects Model (HOE) were found to be significant to the study of behavioral intention during the second part of the literature review. Quantitative data is gathered from Chief Financial Officers (CFOs), Business Owners/CEOs, Internal Auditors, Finance Managers, Compliance Officers, Risk Managers, and Audit Committees of Sri Lankan companies during the third phase. The multiple regression approach using ordinary least squares was used to examine quantitative data. The findings support the significant positive impact of awareness, stakeholder pressure, and threat perception factors on the behavioral intention to use forensic accounting services, as well as the negative impact of financial costs and legal factors. This research contributes theoretical as well as practical. The integrative conceptual model, which has effectively integrated factors from the TRA, TPB, HBM, and HOE in examining the behavioral intention of using forensic accounting services, is the theoretical contribution. There has never been an investigation into the company's intention to use professional services, such as forensic accounting services. Additionally, this study is the first to use HOE's awareness and HBM's risk perceptions in an ethical decision-making model. The study's practical implications allow the government of Sri Lanka, professional associations, board of directors, stakeholders in the organization, and accounting firms to gain a better understanding of the reasons behind organizations' resistance to using forensic accounting services for fraud detection and prevention. It will also enable them to create workable techniques and marketing plans to raise forensic accounting services' profile, obtain acceptance, and eventually be used in the battle against fraud.
Combating Money Laundering: Effectiveness of Measures Taken by Sri Lankan Banks to Comply with Regulatory Frameworks
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Perera, A.K.S.S.; Bandara, R.M.S.
Money laundering poses ongoing challenges for countries across the globe. The complexities associated with these challenges vary from one country to another, primarily due to factors such as the unique nature of their financial sectors, the specific anti-money laundering (AML) icies they have adopted, and the capabilities of their central banks in devising a comprehensive framework to address these issues effectively. To overcome these challenges and establish robust AML policies, each country must develop its framework through its central bank. This framework should aim to eliminate obstacles and enhance the effectiveness of the country's AML efforts. To accomplish this, careful identification and inclusion of relevant factors is essential. The paper aims to assess the effectiveness of measures taken by banks in Sri Lanka to comply with regulatory frameworks in combating money laundering. To do so mainly three areas are being considered such as commitment towards legislative compliances, adequate tools and devices, and employee training. To collect data a questionnaire was sent to banks of Sri Lanka and 117 responses were received the questions mainly targeted the executives and managers working at banks of Sri Lanka. SPSS statistics software was used for the data analysis part and a regression model was run considering the assumptions for to run regression model the results of the research showed that the banks of Sri Lanka are committed to legislative compliance and do have adequate tools and devices and do sufficient employee training. Apart from that research also identified that there are constraints that banks face when adapting technological advancements and international collaboration is not up to standards, so recommendations were provided such as investing in continuous technological advancements to stay competitive and aligned with global AML technological standards, AI and machine learning tools, such as natural language processing and predictive analytics, can vastly improve the effectiveness and efficiency of AML and Know Your Customer (KYC) programs by automating complex tasks, identifying patterns, and reducing false positives. The research focuses on assessing the effectiveness of measures in the banking sector in Sri Lanka, excluding non-banking financial institutions. It examines compliance requirements in employee training, legislative compliance commitment, and adequate tools. The study's scope may be limited by data availability, resources, and participant access.
Corporate Tax Planning and Financial Performance of CSE-Listed Tea Plantation Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Kodithuwakku, K.A.L.L.; Rajapakse, R.M.D.A.P.
This meticulous study unravels the intricate interplay between corporate tax planning strategies and the financial performance of tea plantation companies listed on the Colombo Stock Exchange (CSE) in Sri Lanka. The overarching aim is to comprehensively investigate and analyze the nuanced impact of tax planning on these entities. The research spans a meticulously selected sample of 14 tea plantation companies, encapsulating the dynamic period from 2016 to 2022. An exhaustive exploration of key variables, including Return on Equity (ROE), Effective Tax Rate (ETR), Intensity of Capital (IC), Intensity of Inventory, Leverage, and Firm Size (FMS), offers a multifaceted lens through which to examine the complex relationships at play within these corporate structures. The methodological approach involves the scrupulous retrieval of financial statements from diverse and pertinent sources, establishing a robust foundation for the subsequent analysis. Through the application of panel regression analysis, the study unveils a spectrum of noteworthy findings that significantly contribute to the existing body of knowledge. Surprisingly, the Effective Tax Rate emerges without statistical significance, suggesting that the observed impact of tax planning is not statistically significant within the context of the tea plantation companies studied. Nonetheless, the study uncovers positive and statistically significant relationships between Capital Intensity, Firm Size, Leverage, and Return on Equity (ROE). In light of these compelling findings, the study offers strategic recommendations that underscore the importance of optimizing leverage to enhance overall financial performance. These insights not only enrich the academic discourse surrounding tax planning and financial performance but also provide actionable implications for tea plantation companies navigating the intricate landscape of financial management in the unique context of Sri Lanka.
Cost Control Measures and their Impact on the Profitability of Listed Manufacturing Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Nawarathna, K.G.N.M.S.D.; Munasinghe, M.A.T.K.
This study aims to examine the impact of cost control on the profitability of listed manufacturing companies in Sri Lanka with a survey study conducted using five selected listed manufacturing companies in Sri Lanka to provide a critical assessment of the need for and importance of cost control. This study used primary data obtained from five companies that have been in the apparel and fabric industry for many years among the thirty-seven listed manufacturing companies in the Sri Lanka stock market currently operating as manufacturing companies. Descriptive and analytical research design tools are used to examine the effect of some key variables such as budgeting, standard costing, internal and external costing, marginal costing, and so on. Survey data from five manufacturing companies were analyzed using various statistical tools. Hypothesis testing was done to find the relationship between independent variables and increase research quality. Data was collected by distributing a structured questionnaire to the management and employees of the respective company. The findings of the research show that cost control tools have a positive relationship with profitability. Moreover, the lack of adequate resources to apply cost control tools in manufacturing companies in Sri Lanka has created a more challenging situation. Therefore, the research found that all the above cost control instruments contribute greatly to controlling costs and increasing the profitability of organizations, among which marginal costing is recommended to be used as the most appropriate cost control instrument. As a result, companies will maximize value and control costs in the coming days.
Determinants of Enterprise Resource Planning (ERP) System Usage in Sri Lankan Companies
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Samika, W.A.D.S.V.G.; Perera, M.R.H.
Business Process Management software, commonly known as Enterprise Resource Planning (ERP), facilitates organizations in employing integrated applications for business-process management and automation. Despite its potential benefits, many ERP users often lack sufficient understanding of its functionalities. This study aims to investigate the factors impacting the utilization of ERP within a specific company in Sri Lanka. Utilizing the Diffusion of Innovation (DOI) model, the research seeks to assess the impacts of complexity, compatibility, training, best practices, competitive pressure, and efficiency on end-users' adoption and use of ERP. This study adopted a quantitative research approach and Data was collected through a self-administrative questionnaire, utilizing data from 183 web surveys on selected organizations in Sri Lanka. The sample selection technique was stratified random sampling. Multiple regression analysis was employed using the SPSS 23.0 version to analyze determinants and its effect on ERP use. write this as a university student writing for a research report. The analysis found that training has a significant positive impact on ERP use and also indicates that complexity and best practices have a positive but insignificant relationship with ERP use. The efficiency on ERP use has an insignificant positive effect. The overall model is significant. The findings of this study offer valuable insights for organizations aiming to enhance the effective use of ERP systems and other information systems. Specifically, it is crucial to take into account factors like compatibility and competitive pressure when adopting and implementing new ERP systems. Additionally, focusing on user satisfaction by adopting a user-oriented approach is vital. These outcomes not only have practical implications for current ERP system usage but also provide a foundation for future research, addressing the existing knowledge gaps within the Sri Lankan context.
Determinants of Financial Literacy of Management Undergraduates; Evidence from University of Kelaniya
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Madhushika, D.L.D.; Perera, W.T.N.M.
Financial literacy is the ability of individuals to manage their finances, make wise financial decisions, and establish long-term plans. The significance of financial literacy has increased as economies change, and financial markets become more complicated. This is especially pertinent for recently graduated students who are getting ready to turn into professionals and commence their professional careers. Consequently, establishing a strong foundation in financial literacy becomes crucial for university students' long-term financial well-being and success in job markets both domestically and internationally. This research study is conducted to identify the existing level of awareness of financial literacy and the factors that influence to financial literacy of management undergraduates of Sri Lanka. The researcher explored several previous research articles relating to the financial literacy of management undergraduates. According to the conceptual framework of the study, the dependent variable is financial literacy, and the independent variables are demographic factors, educational factors, and personality factors. The researcher collected data from the 250 final-year management undergraduates of the Faculty of Commerce & Management Studies at the University of Kelaniya by distributing a structured questionnaire. The researcher has conducted a multiple regression analysis to analyze the collected data. According to the research study's findings, the students have basic knowledge in financial literacy and other practices. Further, it was discovered that financial literacy positively correlated with age, gender, and family income. However, it is interesting to observe a negative correlation between financial literacy and educational variables. Moreover, it was revealed that there is a significant positive correlation between financial literacy and personality factors such as financial behavior, financial attitudes, and financial knowledge.
Determinants of Non-Performing Loans in Listed Commercial Banks in Sri Lanka: A Comparison between Pre- and Post-Covid-19 Period
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Kaushalya, R.D.A.; Karunarathne, W.V.A.D.
The Listed Commercial Banks in Sri Lanka play a critical role in the economy. They handle financial intermediation processes. The study attempts to investigate the factors affecting non-performing loans (NPLs) of Listed Commercial Banks in Sri Lanka and how COVID-19 impacts non-performing loans (NPLs) of Listed Commercial Banks by using twenty Listed Commercial Banks. This study employed a quantitative deductive approach by using secondary data such as annual reports of selected Listed Commercial Banks from 2013 to 2022 based on annual reports and other statistical reports of the Central Bank of Sri Lanka. The study decided to collect data from all listed commercial banks in Sri Lanka but since the data unavailability were considered the twenty listed commercial banks in Sri Lanka. The dependent variable is non-performing loans and the independent variables include macro-economic and institutional-specific factors. Based on the literature, this study has used the size of the company, return on assets (ROA), capital adequacy ratio (CAR), and efficiency are considered as institutional-specific factors, and gross domestic products, inflation rate, interest rate, and unemployment rate are considered as macro-economic factors. The impact of macroeconomic and institutional-specific factors on non-performing loans was observed through multiple regression models. According to the findings, bank size, CAR, GDP, and inflation have a significant relationship with non-performing loans. However, it found that ROA, Interest rate, efficiency, and unemployment rate have no significant relationship with non-performing loans. When comparing pre- and post-COVID-19 periods, COVID-19 has a significant impact on NPLs. The results of this study will be beneficial for the management of the entire banking sector including public and private banks as well as current customers, potential customers, future researchers, and also policy makers.
Determinants of Online Banking Usage: With Special Reference to Customers of People’s Bank at Colombo District
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Wijerathna, D.C.D.; Perera, M.R.H.
The Internet is now an essential part of people's modern life. Sri Lanka's banking and finance sector has benefited from the advancement of information technology by incorporating information and communication technology into its operations. However, Sri Lanka being a developing country has a lower internet banking usage rate than other developing and developed countries around the world. As a result, the researcher looks for variables that affect the percentage of people using Internet banking. The primary objective of this study is to investigate the factors that promote the use of Internet banking among the customers of People's Bank. Based on prior research, the investigators determined three key variables that influence the percentage of people who use online banking. These are safety, compatibility, and useful risk perceptions. The results of the analysis show a strong positive correlation between the previously mentioned factors and the percentage of people using Internet banking. The second objective is to investigate the current Internet banking usage rate among the customers of People's Bank. Data analysis shows that customers are currently using internet banking at a higher-than-average rate. As a result, the researcher concluded that Internet banking is currently high and not yet acceptable.
Effect of Accounting Information System Quality on Financial Performance of Small and Medium Enterprises: With Special Reference to Western Province in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Wijerathne, E.W.G.G.H.C.; Karunarathna, W.V.A.D.
Information technology is crucial for every organization in the current competitive business world and Accounting Information Systems (AIS) play a major part in that information advancements. SMEs play a crucial role in all economies, irrespective of their development status. The objective of this study is to identify the Effect of Accounting Information System Quality on the Financial Performance of Small and Medium Enterprises in Sri Lanka. The quality of AIS is measured through the independent variables of System Flexibility, System Sophistication, Effectiveness of the System, and System Control. The Dependent variable of financial performance is measured through the Return of Assets of the selected SMEs. This study employed a convenience sampling technique to efficiently attain the desired sample size in a cost-effective and timely manner. The analysis was conducted by using the SPSS software and descriptive statistical measures, correlation analysis, and Linear regression analysis. According to the results of correlation analysis, there is a significant positive relationship between dependent and independent variables. The quality of AIS has a significant relationship with the financial performance of SMEs. Further results found that there is a significant effect of accounting information system quality on the financial performance of small and medium enterprises. That means quality AIS enhances financial performance. The Findings of the study revealed that system effectiveness and system control have a significant impact on financial performance as per the multiple regression analysis. Improving the financial performance of SMEs in Sri Lanka is facilitated by ensuring the excellence of AIS. SME management should additionally focus on improving the quality of their AIS to facilitate comparisons with similar businesses in the sector as well as in the past. This improvement is vital for benchmarking and making well-informed decisions.
The Effect of Audit Quality on Earning Management within Public Listed Companies in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Kalpani, R.M.L.G.U.; Kawshalya, M.D.P.
This research investigates the relationship between audit quality and earnings management in the context of publicly listed companies in Sri Lanka. Earnings management, the discretionary manipulation of financial statements, has significant implications for financial reporting integrity and market confidence. Recognizing the critical role of audit quality in ensuring the reliability of financial information, this study aims to empirically explore whether variations in audit quality influence the extent of earnings management within the Sri Lankan business landscape. Audit quality was measured in the study using three audit proxies: audit firm size, audit fees, and audit committee independence. The degree of earnings management was measured using a discretionary accruals perspective. The study’s scope focuses only on external audits and their impact on earnings management. There are several types of audits, but this study area is limited to external audits due to the availability and more reliable access to information. This research is mainly focused on secondary data gathered from publicly listed companies in Sri Lanka. 40 companies were selected for the study based on 296 publicly listed companies in Sri Lanka, using their most recent five-year annual reports from 2018 to 2022. The study data were analyzed using regression analysis, correlation analysis, and descriptive statistical measures. As an outcome, this study's conclusions will provide more insight into how audit quality affects earnings management. According to the study, there is a small association between audit quality and the degree of earnings management in Sri Lankan listed firms. According to the study, there is a negative correlation between audit quality and the level of earnings management in Sri Lankan listed companies. Additionally, the study shows that the oversight mechanism is ineffective because there is no statistically significant correlation between earnings management and the variables. As a result, the study concludes that the level of earnings management is not significantly impacted by audit quality. This may be because there are many inefficient monitoring systems in place, which discourage auditors from improving auditing.
The Effect of Bank Expansion on Profitability with Special References to Commercial Banks in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Jayasinghe, J.K.K.N.; Perera, M.R.H.
One of the primary causes of the current financial markets' increased complexity and rivalry is the rapid advancement of information and communication technology (ICT) and its use in financial markets worldwide. For a few decades, banks in Sri Lanka have also used bank expansion to provide their services. To determine the impact of bank expansion on the profitability of Sri Lankan banks, a very limited number of studies have been carried out in that country. The main objectives of the research are to investigate how bank expansion affects profitability and whether the size of the firm, the number of ATMs, the number of branches, and fee and commission incomes have an impact on Sri Lanka's commercial banks' profitability. To examine the effects of bank expansion on the profitability of Sri Lankan commercial banks, a sample of sixteen commercial banks was chosen for this study, and data was collected between 2013 and 2022 from the banks' published annual reports. Additionally, this study examined the Return on Equity (ROE) as the dependent variable and Bank expansion as the independent variable to evaluate the impact of bank expansion on bank performance. The method by which each bank distributes its fee and commission income has been chosen as a sign of technological expansion (online banking). The number of ATMs, branches, and firm size of the bank have been considered for this study's geographical expansion. The regression model has been used in this study to examine how bank expansion affects profitability.
The Effect of Company Characteristics and Auditor Characteristics to Audit Report Lag
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Gunathilaka, M.A.N.N.P.; Kaushalya, M.D.P.
The research aims to investigate the impact of company-specific attributes and auditor-specific features on audit report timeliness, filling a critical gap in the current academic literature. The study focuses on the relationship between company and auditor characteristics and the determinants of audit report lag. The research design includes a systematic framework for data collection and analysis, ensuring the required information is obtained to address the research questions. The thesis structure consists of five chapters, covering the literature review, research design, empirical models, methodology, and data analysis. The literature review explores the theoretical and empirical foundations of audit report lag, including Agency Theory, Compliance Theory, and Capital Structure Theory. The result shows that audit committee effectiveness and profitability had a significant negative impact on audit report lag. while accounting complexity had a significant positive impact on audit report lag. Meanwhile, financial condition, company size, audit fee, and auditor reputation did not show a significant influence on audit report lag.
The Effect of Corporate Governance Mechanisms on the Degree of Integrated Reporting in the Listed Companies on CSE
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Chiranthana, U.H.; Tilakasiri, K.K.
This study aimed to evaluate the effect of corporate governance mechanisms on integrated reporting in the listed companies on CSE. The sample of this study includes annual reports of 40 listed non-financial companies in Sri Lanka under market capitalization that reported IR disclosure information for five years during 2018-2022. This research used secondary data, data taken from the annual reports issued by the companies. The study considered four corporate governance mechanisms as independent variables that are board composition, board size, board diversity and ownership structure. The dependent variable is IR which is measured by using the Integrated Reporting Disclosure Index. Qualitative descriptive panel data analyses were used to analyze the information contained in the reports to recognize the impact of Corporate Governance Mechanisms on IR. Research results suggest that there is a positive significant impact of board composition, board size and ownership structure on disclosure of integrated reporting. However, there is no impact of board diversity on the disclosure of IR. Therefore, this study contributes to the current literature on IR in the Sri Lankan context. In order to avoid agency conflict, minimise the information asymmetry among stakeholders and maintain long-term relationships with their stakeholders, disclosure of integrated reporting information can be favourable for a company. The findings of this study also provide insights for policymakers and practitioners with regard to IR disclosures in companies that prepare integrated reports and need to establish specific guidelines in this respect.
The Effect of Covid -19 on the Profitability: Evidence from Commercial Banks in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Nisansala, H.N.; Perera, W.T.N.M.
This study aimed to evaluate the financial performance of the banking sector during the COVID-19 pandemic. We analyze the pre- and post-COVID situation and evaluate the impact of the situation. The sample of this study includes annual reports of 15 banks currently operating in Sri Lanka under the Central Bank of Sri Lanka. This research used secondary data, data taken from financial reports, and annual reports issued by companies. The independent variable is banking profitability measured using Return on Equity, depending on variables consisting of nonperforming loan ratio, loan-to-deposit ratio, liquid asset ratio, interest rate, debt-to-equity ratio, and capital adequacy ratio. Qualitative descriptive panel data analyses were used to analyze the information in the reports to analyze the pandemic's impact on banking performance. The formulation of the regression model is used to analyze the data. Covid 19 hit the banking sector in a critical way in every country. Researchers gathered pre- and post-COVID situations data through commercial banks' annual reports to investigate during covid and post covid situations. The results show significant differences between the commercial banks' profitability measures at various stages of the pandemic. Important variables that impact banks' financial success include interest rate fluctuations, client behavior changes, government actions, and the effectiveness of risk management plans. The study's conclusions are beneficial not only to the banking sector but also to stakeholders, regulators, and policymakers who are developing plans to strengthen financial institutions' ability to withstand unexpected events in the future. In the end, the research hopes to add to the conversation on how global health crises and financial stability interact by offering practical advice for overcoming obstacles and promoting long-term development in the banking industry.
The Effect of Forensic Accounting on Financial Fraud Detection: Sri Lankan Context
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Fernando, R.S.D.; Perera, M.R.H.
Every day, fraud and fraudulent activities are increasing, and the concept of Forensic Accounting comes in combating against to that increasingly frauds. Because the visibility of forensic accounting services is required to prevent fraud and fraudulent activities globally. Forensic accounting uses accounting, auditing and investigative skills to examine the finance of an individual or company. As well as the impact of forensic accounting plays a vital role when considering financial fraud detection. So, this study has conducted to examine the effect of forensic accounting practices on financial fraud detection in Sri Lanka. The research has conducted by using the primary data which has been collected from fifty-five (55) respondents via distributing the structured questionnaire to achieve the research objective. Forensic Accounting Skills, Forensic Fraud Investigation, Forensic Fraud Litigation and Knowledge of Forensic Accounting have been considered as independent variables and Financial Fraud detection has been considered as the dependent variable. Descriptive statistics, factor analysis and multiple linear regression have been adopted for the analysis purpose by using the Statistical Package for the Social Sciences (SPSS). The findings of the study indicated that there is a significant impact between forensic accounting skills and knowledge of forensic accounting on financial fraud detection. Also, it has shown that there is no significant impact between forensic fraud investigation and forensic fraud litigation on financial fraud detection. However, the study reveals that forensic accounting practices affect the level of financial fraudulent activities. As well as the research concludes that the use of forensic accounting knowledge and forensic accounting skills are important in fighting against financial fraud in both the public and private sectors of Sri Lanka.
The Effect of Fraud Risk Management Practices on the Financial Performance of Commercial Banks in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Wijethilaka, B.D.N.; Gunasekara, U.L.T.P.
This study examines the effect of fraud risk management practices on the financial performance of commercial banks in Sri Lanka. The sample consists of 24 licensed commercial banks in Sri Lanka. Primary was used for the study and multiple linear regression analysis was used to identify the effect of fraud risk management practices on the financial performance of commercial banks in Sri Lanka. Primary data was collected using structured questionnaire. The collected data was analyzed using the Statistical Package for Social Sciences (SPSS) version 23. Regression analysis was used to quantify the effect of the dependent variable and the independent variables. Financial performance of commercial banks became the dependent variable and fraud risk management practices as the independent variables. Fraud risk management practices measured by preventive, detective and Responsive. And also financial performance of commercial banks as measured by ROA. This study targeted Internal Audit officers and bank officers in the internal audit department of the Commercial Banks in Sri Lanka. The study is based on a sample of 110 Internal Audit officers and bank officers in the internal audit department. Out of the sample size 102 questionnaires were duly filled. The study concluded that there is a positive effect of fraud risk management practices on the financial performance of commercial banks in Sri Lanka. This implies that the concerted efforts in fraud prevention, detection, and response contribute to enhanced financial outcomes for these institutions. The findings underscore the importance of a holistic and proactive approach to fraud risk management in the banking sector. The identified practices not only serve to mitigate the impact of fraud but also positively influence the overall financial health of commercial banks.
The Effect of Internal Controls on Financial Performance; Special Reference to Western Province in Sri Lanka
(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2023) Dharmasena, R.I.M.D.N.; Sujeewa, G.M.M.
The secret to SMEs' success is the effective management of their financial performance, which is a complex undertaking. The creation and maintenance of a strong internal control framework become crucial tools in this endeavor. The purpose of the study was to establish the effect of internal controls on financial performance; special reference to Western Province, Sri Lanka. The study was guided by the following research questions; To what extent does the control environment influence the financial performance of SMEs in Sri Lanka? How does risk assessment affect the financial performance of SMEs in Sri Lanka? What is the impact of control activities on the financial performance of SMEs? How does information and communication impact the financial performance of SMEs in Sri Lanka? What is the relationship between monitoring and the financial performance of SMEs in Sri Lanka? The study specifically investigates the influence of internal control components, including the control environment, risk assessment, control activities, information and communication, and monitoring, on the financial performance of SMEs. Financial performance is measured using Return on Assets (ROA). The study employs a cross-sectional research design, which limits the ability to establish causal relationships. While it can identify associations between internal controls and financial performance, it may not conclusively demonstrate causation. Assistants, Executives, and Managers at SME make up the target population for this study, which is only focused on the Western Province, Sri Lanka. A sample length of 100 respondents has been chosen for this examination. For the purpose of gathering survey data, this study uses a quantitative strategy over a cross-sectional time period. Data was systematically gathered using a structured questionnaire with Likert scale questions. Primary data was collected using a structured questionnaire. The Study used SPSS 26 to analysis the data. Quantitative data was analyzed, and the output presented using descriptive statistics namely: mean, standard deviation, percentages. A multiple linear regression model was used to assess whether internal controls have an effect on the performance of SMEs. the data presentation and analysis of the study which covered the exploratory data analysis, illustrations of demographic factors and descriptive statistics of the sample. Validity and reliability of data has been tested. Further this chapter elaborated the correlation coefficient between Internal control systems and financial performance in Sri Lankan SMEs and evaluated the regression of the model using statistical means to arrive at the outcome to test the hypotheses.