Introduction
Cost accounting is an important component of managerial accounting that has a considerable effect on the development of organizations. The Kingdom of Saudi Arabia is one of the key players in the economic arena of the Middle East, as well as world trade. International corporations are willing to enter the Saudi market, while Saudi companies also try to penetrate new markets (Abdallah 29).
Compliance with international accounting standards and regulations enables companies to avoid certain litigations, as well as increase their profitability (Herath and Alsulmi 2). However, the introduction and adoption of these international standards in Saudi Arabia are associated with several difficulties and peculiarities. Ethical decision-making is one of the areas characterized by the most significant issues. Internal reporting can be seen as one of the most challenging aspects of cost accounting, as it is often less regulated and dependent on the organizational culture (Taschner and Charifzadeh 10). This research proposal highlights the central aspects of the research that aims at exploring the challenges associated with internal reporting in Saudi Arabia.
Background and Significance
Companies operating in the global market and organizations that have to compete with multinationals in the Saudi market have adopted international financial reporting standards (IFRS), which has an impact on their cost accounting practices. Ethical decision-making is one of the key goals related to the establishment of any standards and rules. One of the primary aspects of ethical decision-making is the disclosure of information to authorities and companies’ executives.
The major focus of scholars is placed in this area (Habbash 742). The studies linked to cost accounting in Saudi Arabia and ethical decision-making often touch upon the cultural, social, and political peculiarities of the country and their influence on the use of international standards (Herath and Alsulmi 4). The gap between the existing accounting norms and international guidelines can be considerable and difficult to address, especially when it comes to some industries or smaller organizations.
Internal reporting receives less attention although it is relevant for the sustainable development of companies. Rodgers and Al Faye claim that the current research on the matter is insufficient and inconsistent with the needs of practitioners (220). The researchers report that three major ethical pathways are employed, including rule-based, preference-based, and principle-based (Rodgers and Al Faye 220). Nevertheless, the factors affecting accountants’ behaviors when choosing the pathway are yet to be explored in detail. It is acknowledged that standards regulating external reporting are often employed for internal decision making as well (Vanderbeck and Mitchell 530).
However, the use of such practices is not common among Saudi companies due to the cultural, social, and economic peculiarities of the country. It is also rather common that some decisions are shaped by organizational goals or executives’ objectives.
The need to address ethical issues is specifically relevant during the period of financial constraints when accountants may be involved in decision-making regarding cost reduction (Inman 78). Ethical issues may arise at various stages of company development, and accountants’ ability to manage them effectively may have an impact on organizational performance. It is necessary to add that these issues are often investigated in terms of the overall accounting practices, while cost accounting remains under-researched.
Problem Statement and Purpose of the Study
Ethical decision-making in cost accounting is crucial for the proper functioning of any business irrespective of the industries it is involved in or its size. Mahjoub states that financial reporting is one of the most important communication channels that ensures effective communication between companies and the public (19). This interaction is vital for the sustainable growth of businesses as the modern business world is characterized by transparency and the focus on organizations’ impact and input on the social sphere.
However, practitioners are often poorly equipped with the necessary skills and knowledge to make ethical decisions and share data externally and internally in the most appropriate way or ensure ethical choices in other areas of their work. In order to help accountants to improve their skills and ensure their ethical conduct, it is important to evaluate their perspectives regarding the matter. It is essential to explore these professionals’ attitudes towards ethical decisions, challenges they encounter, and ideas concerning their behaviors and choices.
The present research aims at identifying factors affecting practitioners’ ethical decision-making in cost accounting. Internal reporting, as well as other areas of concern mentioned by the participants, will receive the necessary attention. Large Saudi companies operating in diverse markets and industries will be involved in the research as it is important to explore the most general issues accounting professionals face. This research is an attempt to identify practitioners’ views on the matter. The analysis of these perspectives will be instrumental in creating a sound framework for the development of standards that will be widely accepted, which can be seen as the focus of further studies.
Methods
Sampling
Since the primary goal of the research to examine professionals’ insights and attitudes, the qualitative research design will be utilized. This approach ensures the analysis of relevant ideas of knowledgeable people. Convenience sampling will be employed as it guarantees the involvement of practitioners who have the necessary knowledge and are willing to share their views regarding the matter (Smith 130). The recruitment of the participants will be implemented by sending emails directly to accountants employed at large and medium-sized Saudi companies located in Riyadh. The elements of snowball sampling techniques will also be used as the recruited people will be asked to refer to a professional they know.
The practitioners will receive invitations to take part in the research. Prior to sending the invitations, the corresponding permission of the employers will be obtained. The emails will contain the data regarding the purpose and methods of the research. The accountants will be informed that no specific accounting data disclosure will take place. The primary goal is to identify ideas, concerns, and challenges associated with ethical decision-making in cost accounting.
The inclusion criteria will be a five-year or longer working experience at a large and medium-sized Saudi company and participants’ nationality. It is important to explore the views of Saudi accountants (as compared to expatriates) regarding the use of international standards that are associated with ethical decision-making. Other criteria such as age, gender, socioeconomic status, and educational background are not relevant for the present study. Twenty participants will take part in this research as this sample size is sufficient for outlining some of the most recurrent themes discussed in relation to ethical decision-making in cost accounting.
Based on the review of the current literature on the matter, it is possible to hypothesize that:
- Saudi accountants have to address ethical dilemmas when reporting internally.
- Saudi accounting professionals are not properly trained to address ethical issues associated with internal reporting.
- Saudi accountants find it challenging to address some ethical issues linked to internal reporting, which leads to low morale and job dissatisfaction.
In order to maintain the focus of the study, it is possible to develop several research questions to be answered during this research. The primary research questions can be formulated in the following way:
- What are the major peculiarities of internal reporting in Saudi Arabia, as seen by accounting professionals?
- What challenges do Saudi accountants face when reporting internally?
- What measured do the participants undertake to ensure making ethical decisions when reporting internally?
Data Collection and Data Analysis
The data collection method that is often used in qualitative studies is interviewing. This technique enables researchers to elicit the most comprehensive information regarding the participants’ views (Smith 157). Face-to-face interviews will last for approximately an hour and will include ten open-ended questions, which will ensure the focus on participants’ ideas and concerns regarding ethical-decision making in cost accounting with the focus on disclosure, international standards, peculiarities of Saudi accounting, and training. At the same time, technology-facilitated communication can also take place if necessary.
It can be difficult to arrange a meeting with a person, so the interview can be held with the help of the corresponding applications. The interviews will be recorded and transcribed with the use of the corresponding software. The correctness of the transcriptions will be checked manually to avoid any possible mistakes.
The thematic analysis of the qualitative data will be implemented in order to identify the most recurrent themes. This type of data analysis is common for qualitative studies, and it usually involves thematic coding (Smith 123). The analysis will be carried out with the help of ANOVA software, which will make the process more efficient. The codes will be grouped into themes that will be considered in terms of the participants’ perspectives regarding the matter.
Ethical Considerations
All the ethical standards will be followed during the implementation of this research. The corresponding permissions of the university board and the involved organizations’ management will be received. The participants will sign written consent forms where the central details regarding the study will be highlighted. The confidentiality and anonymity of the employees will be ensured, and no personal information will be disclosed. The participants will be informed that they are free to withdraw from the research at any point.
Reliability and Validity
In order to ensure the validity and reliability of the present study, it is necessary to undertake certain measures. First, possible biases associated with sampling will be properly analyzed and reflected upon throughout the study. Furthermore, rich verbatim descriptions of the participants’ statements will be provided in order to illustrate findings. These thick descriptions will also be instrumental in revealing possible biases that can occur during the analysis of the interviews. The use of data analysis software also contributes to findings’ reliability.
Limitations
It is necessary to consider certain limitations associated with the current study. The limited sample size is one of the major limitations, but the major focus of the present research is the identification of some themes and topics Saudi accounting professionals find the most urgent. Therefore, the number of participants can be seen as sufficient for the purpose of this research. The companies located in Riyadh will be addressed, so the experiences of people working in the capital city will be analyzed. At the same time, the policies and organizational cultures of businesses located in other cities may be considerably different from the ones adopted by the organizations operating in Riyadh.
Again, the primary purpose of this study is to unveil some of the most urgent themes related to ethical decision-making in Saudi companies. Further studies may analyze the perspectives of professionals working in other contexts (smaller cities, different regions, or non-profit organizations).
Works Cited
Abdallah, Wagdy M. Accounting, Finance, and Taxation in the Gulf Countries. Palgrave Macmillan US, 2016.
Habbash, Murya. “Corporate Governance and Corporate Social Responsibility Disclosure: Evidence from Saudi Arabia.” Social Responsibility Journal, vol. 12, no. 4, 2016, pp. 740-754.
Herath, Siriyama Kanthi, and Fareedah H. Alsulmi. “International Financial Reporting Standards (Ifrs): The Benefits, Obstacles, and Opportunities for Implementation in Saudi Arabia.” International Journal of Social Science and Business, vol. 2, no. 1, 2017, pp. 1-18.
Inman, Mark Lee. Cost Accounting. Butterworth-Heinemann, 2014.
Mahjoub, Lassaad Ben. “Sustainability Reporting and Income Smoothing: Evidence from Saudi-Listed Companies.” Sustainability Assessment and Reporting, edited by Soner Gokten and Pinar Okan Gokten, BoD – Books on Demand, 2018, pp. 17-32.
Rodgers, Waymond, and Salem Al Fayi. “Ethical Pathways of Internal Audit Reporting Lines.” Accounting Forum, vol. 43, no. 2, 2019, pp. 220-245.
Smith, Malcolm. Research Methods in Accounting. SAGE, 2017.
Taschner, Andreas, and Michel Charifzadeh. Management and Cost Accounting. John Wiley & Sons, 2016.
Vanderbeck, Edward J., and Maria R. Mitchell. Principles of Cost Accounting. Cengage Learning, 2015.