Investigating Accounting Factors through Audited Financial Statements in Businesses toward a Circular Economy: Why a Sustainable Profit through Qualified Staff and Investment in Technology?

This study examines the investigation of accounting factors through audited financial statements in businesses by analyzing the qualified staff and investment in technology for sustainable profit. Therefore, the main goal is to analyze whether qualified staff and investment in technology affect the sustainability of profit in businesses through the investigation of accounting factors in the audited financial statements toward a circular economy, more specifically in these financial items: total assets (TASS), and intangible assets (IASS), total liabilities (TLIA), total income (TREV), and net financial income (NFI), based on questions about which financial items businesses should take care of, as well as businesses that do not invest in technologies and skilled staff: does this hinder profit sustainability? Therefore, for this study, data are collected from the financial statements (balance sheet and income statement) of (N = 800) businesses according to their activity (manufacturing businesses = 256, service businesses = 192, and distribution businesses = 353) during the period (2020–2022). The results show that each of the variables and factors had a significant impact on sustainable profit through the circular economy in (N = 800) businesses. However, to have a sustainable profit in business, it is strongly recommended to pay attention to these findings: businesses should (a) be careful with total liabilities, (b) increase the performance of total assets, (c) increase the performance of net financial income, (d) increase the performance of total business income, and (e) increase and develop the skills of workers, as well as improve technology (equipment, machinery, etc.). With implications and limitations, it was difficult to access some of the financial statements; there are only a limited number of variables, so the same models can be analyzed for other businesses, variables, and countries.

[1]  Michael Gerlich.  How Short-Term Orientation Dominates Western Businesses and the Challenges They Face—An Example Using Germany, the UK, and the USA , 2023, Administrative Sciences.

[2]  Anna Pietruszka-Ortyl,et al.  Barriers and Drivers for Changes in Circular Business Models in a Textile Recycling Sector: Results of Qualitative Empirical Research , 2023, Energies.

[3]  Oihab Allal-Chérif,et al.  Born to be sustainable: How to combine strategic disruption, open innovation, and process digitization to create a sustainable business , 2023, Journal of Business Research.

[4]  Enkeleda Lulaj.  AN UNSTOPPABLE AND NAVIGATING JOURNEY TOWARDS DEVELOPMENT REFORM IN COMPLEX FINANCIAL-ECONOMIC SYSTEMS: AN INTERVAL ANALYSIS OF GOVERNMENT EXPENSES (PAST, PRESENT, FUTURE) , 2022, Business, Management and Economics Engineering.

[5]  Mieke Jans,et al.  Digitalization in accounting–Warmly embraced or coldly ignored? , 2022, Accounting, Auditing & Accountability Journal.

[6]  J. Martins,et al.  Circular Entrepreneurship in Emerging Markets through the Lens of Sustainability , 2022, Journal of Open Innovation: Technology, Market, and Complexity.

[7]  M. Panait,et al.  Guest editorial: Circular economy and entrepreneurship in emerging economies: opportunities and challenges , 2022, Journal of Entrepreneurship in Emerging Economies.

[8]  Cătălin Popescu,et al.  Social Innovation, Circularity and Energy Transition for Environmental, Social and Governance (ESG) Practices—A Comprehensive Review , 2022, Energies.

[9]  F. Rehman,et al.  Interplay in Circular Economy Innovation, Business Model Innovation, SDGs, and Government Incentives: A Comparative Analysis of Pakistani, Malaysian, and Chinese SMEs , 2022, Sustainability.

[10]  Fahd Alduais,et al.  Conciseness, Financial Disclosure, and Market Reaction: A Textual Analysis of Annual Reports in Listed Chinese Companies , 2022, International Journal of Financial Studies.

[11]  H. Kabir,et al.  How did IFRS 15 affect the revenue recognition practices and financial statements of firms? Evidence from Australia and New Zealand , 2022, Journal of International Accounting, Auditing and Taxation.

[12]  Chenxi Wang.  Firm Asset Structure and Risk Aversion , 2022, SSRN Electronic Journal.

[13]  Christian Chiarot,et al.  Evaluation of the Applicability of the Circular Economy and the Product-Service System Model in a Bearing Supplier Company , 2022, Sustainability.

[14]  Ryan P. McDonough,et al.  Accounting policies in the public sector: Characteristics and consequences of accounting for capital assets , 2022, Journal of Accounting and Public Policy.

[15]  Yulin Bi.  Financial Accounting Information Data Analysis System Based on Internet of Things , 2022, Mathematical Problems in Engineering.

[16]  Lindita Mukli,et al.  A Framework for Short- vs. Long-Term Risk Indicators for Outsourcing Potential for Enterprises Participating in Global Value Chains: Evidence from Western Balkan Countries , 2022, Journal of Risk and Financial Management.

[17]  Philip M. J. Reckers,et al.  Auditor interventions that reduce auditor liability judgments , 2022, Advances in Accounting.

[18]  Hamid Hosseini Nesaz,et al.  Development of a new asset liability Management model with liquidity and inflation risks based on the Lower Partial Moment , 2022, Expert Syst. Appl..

[19]  Xiaowei Chen.  The Fusion Model of Financial Accounting and Management Accounting Based on Neural Networks , 2022, Mobile Information Systems.

[20]  G. Kirch,et al.  Do internal capital markets in business groups mitigate firms financial constraints? , 2022, Journal of Banking & Finance.

[21]  N. O’Sullivan,et al.  When does audit committee busyness influence earnings management in the uk? evidence on the role of the financial crisis and company size , 2022, Journal of International Accounting, Auditing and Taxation.

[22]  I. Troshani,et al.  Consequences of CSR reporting regulations worldwide: a review and research agenda , 2022, Accounting, Auditing & Accountability Journal.

[23]  Patrick Velte.  The impact of external auditors on firms’ financial restatements: a review of archival studies and implications for future research , 2022, Management Review Quarterly.

[24]  L. Ning,et al.  Intangible Assets and Foreign Ownership in International Joint Ventures: Moderating Role of Related and Unrelated Industrial Agglomeration , 2022, Research in International Business and Finance.

[25]  C. Schinckus,et al.  The role of strategic interactions in risk-taking behavior: A study from asset growth perspective , 2022, International Review of Financial Analysis.

[26]  Xuechen Hou.  Design and Application of Intelligent Financial Accounting Model Based on Knowledge Graph , 2022, Mobile Information Systems.

[27]  Mohammad Riaz Uddin,et al.  Do intangible assets provide corporate resilience? New evidence from infectious disease pandemics , 2022, Economic Modelling.

[28]  Shawkat Rahman,et al.  A Novel Approach to Improving E-Government Performance from Budget Challenges in Complex Financial Systems , 2022, Complex..

[29]  Ana Colovic,et al.  Liability of informality and firm participation in global value chains , 2022, Journal of World Business.

[30]  P. Merello,et al.  Is the sustainability profile of FinTech companies a key driver of their value? , 2022, Technological Forecasting and Social Change.

[31]  T. Nisar,et al.  Disruptive innovation: Designing business platforms for new financial services , 2022, Journal of Business Research.

[32]  M. Khan,et al.  The development of internet financial reporting publications: A concise of bibliometric analysis , 2021, Heliyon.

[33]  H. Dawid,et al.  Smart Products: Liability, Investments in Product Safety, and the Timing of Market Introduction , 2021, Journal of Economic Dynamics and Control.

[34]  Lin Yang.  Cloud Data Integrity Verification Algorithm for Sustainable Accounting Informatization , 2021, Mathematical Problems in Engineering.

[35]  J. Lampel,et al.  Too little or too much of good things? The horizontal S-curve hypothesis of green business strategy on firm performance , 2021 .

[36]  D. Smith,et al.  Auditor liability and excess cash holdings: Evidence from audit fees of foreign incorporated firms , 2021, International Review of Financial Analysis.

[37]  Davide Villani.  Revisiting the External Financial Dependence index in light of the rise of Corporate Net Lending: What do we really measure? , 2021 .

[38]  Wenyao Zhang,et al.  Investigating the Complex Relationship between Financial Performance and Company’s Green Behavior: A Comparative Analysis , 2021, Discrete Dynamics in Nature and Society.

[39]  C. de Villiers,et al.  How to Communicate and Use Accounting To Ensure Buy-In from Stakeholders - Lessons for Organizations from Governments’ Covid-19 Strategies , 2021, Accounting, Auditing & Accountability Journal.

[40]  Enkeleda Lulaj.  Quality and reflecting of financial position: an enterprises model through logistic regression and natural logarithm , 2021 .

[41]  C. Xuan,et al.  A study on the motivation of financialization in emerging markets: The case of Chinese nonfinancial corporations , 2021 .

[42]  Martin Schmidt,et al.  Exploratory Insights into Audit Fee Increases: A field study into Board Member Perceptions of Auditor Pricing Practices , 2021, International Journal of Auditing.

[43]  S. Turley,et al.  Understanding How Big Data Technologies Reconfigure the Nature and Organization of Financial Statement Audits: A Sociomaterial Analysis , 2021, European Accounting Review.

[44]  Enkeleda Lulaj.  Accounting, Reforms and Budget Responsibilities in the Financial Statements , 2021 .

[45]  I. E. Göktürk,et al.  Investigation of Accounting Ethics Effects on Financial Report Quality & Decision Making: Evidence from Kabul-based Logistic Corporations , 2021 .

[46]  Ziyue Chen,et al.  Research on Accounting Intelligence System Modeling of Financial Performance Evaluation , 2021, Secur. Commun. Networks.

[47]  M. Mardi,et al.  Effect of Accounting Information Systems, Teamwork, and Internal Control on Financial Reporting Timeliness , 2020, The Journal of Asian Finance, Economics and Business.

[48]  Ruicheng Yang,et al.  Detecting Falsified Financial Statements Using a Hybrid SM-UTADIS Approach : Empirical Analysis of Listed Traditional Chinese Medicine Companies in China , 2020, Discrete Dynamics in Nature and Society.

[49]  Felix Wortmann,et al.  How to convert digital offerings into revenue enhancement – Conceptualizing business model dynamics through explorative case studies , 2020, Industrial Marketing Management.

[50]  A. Heshmati,et al.  Circular Economy Business Models with a Focus on Servitization , 2020 .

[51]  Athar Kamal,et al.  Financial and operational efficiencies of national and international oil companies: An empirical investigation , 2020 .

[52]  Zaheer Khan,et al.  Multinational enterprises and the governance of sustainability practices in emerging market supply chains: An agile governance perspective , 2020, Journal of World Business.

[53]  Patricia Guarnieri,et al.  Circular Economy Model Enhanced by Intelligent Assets from Industry 4.0: The Proposition of an Innovative Tool to Analyze Case Studies , 2020 .

[54]  Melvin A. Lamboy-Ruiz,et al.  SOX 404(b) Audits: Evidence from Auditing the Financial Close Process of the Accounting System , 2020, J. Inf. Syst..

[55]  Rafael Laurenti,et al.  Circular Economy Innovation and Environmental Sustainability Impact on Economic Growth: An Integrated Model for Sustainable Development , 2020, Sustainability.

[56]  Cory Searcy,et al.  Technology-enhanced auditing: Improving veracity and timeliness in social and environmental audits of supply chains , 2020 .

[57]  C. Girardone,et al.  Fair Value Accounting and Value Relevance of Equity Book Value and Net Income for European Financial Firms During the Crisis , 2020, Journal of International Accounting, Auditing and Taxation.

[58]  Ahsan Habib,et al.  Workforce environment and audit fees: International evidence , 2020 .

[59]  Faruk Balli,et al.  Corporate net income and payout smoothing under Shari'ah compliance , 2020 .

[60]  P. Coram,et al.  Auditors' Response to Different Reporting Environments: Experimental Evidence from the Quantity and Quality of Auditors' Evidence Demands in China , 2020 .

[61]  M. Nakano,et al.  Financial Reporting Opacity, Audit Quality and Crash Risk: Evidence from Japan , 2020 .

[62]  Steve C. Lim,et al.  Intangible Assets and Capital Structure , 2019, Journal of Banking & Finance.

[63]  P. Voigt,et al.  Investment dynamics in Europe: Distinct drivers and barriers for investing in intangible versus tangible assets? , 2019 .

[64]  Nemit Shroff,et al.  The Effects of Financial Reporting and Disclosure on Corporate Investment: A Review , 2019, Journal of Accounting and Economics.

[65]  Nida Turegun.  Impact of technology in financial reporting: The case of Amazon Go , 2019, Journal of Corporate Accounting & Finance.

[66]  David Goretzko,et al.  Exploratory factor analysis: Current use, methodological developments and recommendations for good practice , 2019, Current Psychology.

[67]  J. Gajewski,et al.  Does increased disclosure of intangible assets enhance liquidity around new equity offerings? , 2019, Research in International Business and Finance.

[68]  Nour Chams,et al.  On the importance of sustainable human resource management for the adoption of sustainable development goals , 2019, Resources, Conservation and Recycling.

[69]  K. Taber.  The Use of Cronbach’s Alpha When Developing and Reporting Research Instruments in Science Education , 2017, Research in Science Education.

[70]  Enkeleda Lulaj,et al.  Role of Analysis CVP (Cost-Volume-Profit) as Important Indicator for Planning and Making Decisions in the Business Environment , 2018, European Journal of Economics and Business Studies.

[71]  A. Gunasekaran,et al.  Contingency factors and complementary effects of adopting advanced manufacturing tools and managerial practices: Effects on organizational measurement systems and firms' performance , 2018, International Journal of Production Economics.

[72]  Talat Afza,et al.  Does managerial behavior of managing earnings mitigate the relationship between corporate governance and firm value? Evidence from an emerging market , 2018, Future Business Journal.

[73]  Nashwa El-Bendary,et al.  Emerging Technologies: IoT, Big Data, and CPS with Sensory Systems , 2018, J. Sensors.

[74]  N. Phuong,et al.  The Study of Factors Affecting the Timeliness of Financial Reports: The Experiments on Listed Companies in Vietnam , 2018 .

[75]  B. Lev.  The deteriorating usefulness of financial report information and how to reverse it , 2017, Accounting and Business Research.

[76]  Noorhayati Mansor,et al.  Management accounting practices of SMEs: The impact of organizational DNA, business potential and operational technology , 2017, Asia Pacific Management Review.

[77]  J. Korhonen,et al.  Circular Economy: The Concept and its Limitations , 2018 .

[78]  Leonidas Milios,et al.  Advancing to a Circular Economy: three essential ingredients for a comprehensive policy mix , 2017, Sustainability Science.

[79]  Oliver M. Rui,et al.  Do Social Ties between External Auditors and Audit Committee Members Affect Audit Quality , 2016 .

[80]  S. Ishak.  Going-Concern Audit Report: The Role of Audit Committee , 2016 .

[81]  Z. Rezaee.  Business sustainability research: A theoretical and integrated perspective , 2016 .

[82]  G. Iatridis.  Financial reporting language in financial statements: Does pessimism restrict the potential for managerial opportunism? , 2016 .

[83]  I. Robu,et al.  The Analysis of the Principal Components of the Financial Reporting in the Case of Romanian Listed Companies , 2015 .

[84]  Ionela-Corina Chersan,et al.  The Relevance of Financial Reporting on the Performance of Quoted Romanian Companies in the Context of Adopting the IFRS , 2015 .

[85]  R. Macve.  Fair Value vs Conservatism? Aspects of the History of Accounting, Auditing, Business and Finance from Ancient Mesopotamia to Modern China , 2013 .

[86]  W. Rowe,et al.  The liability of closeness: Business relatedness and foreign subsidiary performance , 2012 .

[87]  J. M. Argiles,et al.  ACCOUNTING RESEARCH: A CRITICAL VIEW OF THE PRESENT SITUATION AND PROSPECTS , 2011 .

[88]  Liisa-Maija Sainio,et al.  The logic of revenue logic? Strategic and operational levels of pricing in the context of software business , 2009 .

[89]  Jasim Al-Ajmi.  Audit and reporting delays: Evidence from an emerging market , 2008 .

[90]  K. Merchant.  Why interdisciplinary accounting research tends not to impact most North American academic accountants , 2008 .

[91]  Owolabi M. Bakre.  Financial reporting as technology that supports and sustains imperial expansion, maintenance and control in the colonial and post-colonial globalisation: The case of the Jamaican economy , 2008 .

[92]  K. Hooper,et al.  Accounting scandals, ethical dilemmas and educational challenges , 2008 .

[93]  Loi Teck Hui,et al.  Strategic organizational conditions for risks reduction and earnings management: A combined strategy and auditing paradigm , 2007 .

[94]  Ira Solomon,et al.  It's all about audit quality: Perspectives on strategic-systems auditing , 2007 .

[95]  E. Fleisch,et al.  An investigation of the relationship between behavioral processes, motivation, investments in the service business and service revenue , 2007 .

[96]  B. Frame,et al.  Accounting technologies and sustainability assessment models , 2007 .

[97]  Daniel E. Sichel,et al.  Intangible Capital and U.S. Economic Growth , 2006 .

[98]  Joseph V. Carcello,et al.  AUDIT COMMITTEE CHARACTERISTICS AND AUDITOR DISMISSALS FOLLOWING NEW GOING CONCERN REPORTS , 2003 .

[99]  I. Caddy.  Intellectual capital: recognizing both assets and liabilities , 2000 .

[100]  V. Beattie,et al.  Audit market competition: auditor changes and the impact of tendering , 1998 .

[101]  N. Ahadiat,et al.  Ethics education in accounting: An investigation of the importance of ethics as a factor in the recruiting decisions of public accounting firms , 1993 .

[102]  C. Humphrey,et al.  From techniques to ideologies: An alternative perspective on the audit function , 1990 .

[103]  R. Scapens.  Researching management accounting practice: The role of case study methods , 1990 .

[104]  J. Davanzo,et al.  Accounting for non-market activities in the distribution of income: An empirical investigation☆ , 1986 .

[105]  John H. Waterhouse,et al.  A contingency framework for management accounting systems research , 1978 .