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And Their Impact On Discovering Material Misstatements – An Empirical Study On Jordanian Commercial Banks

Author

Listed:
  • Abdul Razzak Alshehadeh

    (Al-Zaytoonah University of Jordan, Faculty of Business)

  • Abdallah Atieh

    (Al-Zaytoonah University of Jordan, Faculty of Business)

Abstract

This study aims to identify the impact of the external auditor’s analytical procedures on the financial statements and reports for the detection of material misstatements of the Jordanian commercial banks. The impact of independent variables (profitability, liquidity, capital solvency and the employment of funds ratios) on the dependent variable (the detection of material misstatements) was measured. The dependent variable is represented by the earnings management, which is measured by the discretionary accruals. The quantitative standard method was used to analyse the financial statements and analytical procedures; moreover, the Jones Model was used to measure earnings management. Additionally, the multivariate linear regression model was used to test the hypothesis of the study, and to indicate the relationships between the variables. The study population consisted of five Jordanian commercial banks. The data was collected from 2011 to 2017. This study concluded that there is no statistically significant impact of the analytical procedures relating to the ratios of liquidity, profitability, solvency, and employment of funds that the external auditor could undertake to discover material misstatement of the financial statements of Jordanian commercial banks. Finally, the study recommended that auditors should be highly competent and deeply knowledgeable in using the analytical procedures to judge the fairness of financial data and be free of material misstatements.

Suggested Citation

  • Abdul Razzak Alshehadeh & Abdallah Atieh, 2020. "And Their Impact On Discovering Material Misstatements – An Empirical Study On Jordanian Commercial Banks," Ekonomski pregled, Hrvatsko društvo ekonomista (Croatian Society of Economists), vol. 71(3), pages 271-300.
    • Handle: RePEc:hde:epregl:v:71:y:2020:i:3:p:271-300
    DOI: 10.32910/ep.71.3.4
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    More about this item

    Keywords

    Analytical Procedures; Material Misstatements; Commercial Banks; External Auditor; Financial Statements;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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