There is an uploaded draft of the companies under my draft. The data collected in it are for the years 2016, 2017 and 2018 data and that is by going through the financial reports. However, I have only completed 50 companies for each county. The aim of this exercise is to test if there is misstatement/restatements in the financial statements.
This exercise is for Oman, KSA and Kuwait for the years 2016, 2017 and 2018. There is an excel sheet uploaded under my draft which has only 50 companies. You have to complete all listed companies in each country. For example, KSA has around 183 companies.
Create a new excel sheet or continue on my draft in the same way. The objective of this exercise is to test the financial reports of each country.
Notes:
AM = Firm j in time period t is scored one (1) if there is an occurrence of an accounting misstatement in the firm’s financial reports where at least one misstated item exists; otherwise firm j is scored zero (0).
Big4 = Firm j in time period t is scored one (1) if the external auditor is a noted member of BIG4 audit firms (i.e., EY, DT, PWC, KPMG); otherwise firm j is scored zero (0).
Specialization = Firm j in time period t is scored one (1) if the external auditor is a defined as an industry specialist to the industry k that firm j is classified; otherwise firm j is scored zero (0).
Delay = Number of days between the end of the financial year of firm j to the date the independent auditor’s report is signed.
AUDCHG = Firm j is scored one (1) if during time period t the external auditor was changed; otherwise firm j is scored zero (0).
Own = Proportion of common outstanding shares held by the substantial shareholders of firm j in time period t.
FAM = Firm j in time period t is scored one (1) if the major shareholder in time period t is the original founding family; otherwise firm j is scored zero (0).
CROSS = Firm j in time period t is scored one (1) if the ownership structure of the entity is arranged in the form of pyramids (or cross-holdings); otherwise firm j is scored zero (0).
LEV = Ratio of total debt of firm j at the end of time period t divided by the total assets at the end of time period t.
ISSUE = Firm j is scored one (1) if during time period t the entity issued new securities; otherwise firm j is scored zero (0).
NFCF = Firm j is scored one (1) if the free cash flow for time period t is negative; otherwise firm j is scored zero (0).
MB = Ratio of the market value of firm j at the end of time period t to the book value of equity.
REHAB = Firm j is scored one (1) if during time period t the entity is subject to a financial rehabilitation plan due to financial distress and/or regulatory profitability action; otherwise firm j is scored zero.
DUAL = Firm j is scored one (1) if at the chief executive officer (or most senior executive manager) is also the chairman of the board of directors; otherwise firm j is scored zero.
LNSIZE = Natural logarithm of the total assets of firm j at the end of time period t.
PERFORMANCE = The ratio of net earnings for time period t of firm j divided by the total revenue of firm j in time period t.
AGE = Number of years since firm j was established to end of time period t.
Sample Solution
