Walden University

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Walden Dissertations and Doctoral Studies
Walden Dissertations and Doctoral Studies
Collection

2018

Effective Internal Controls for Recognizing

Contracting Revenues
Antonio Ghaleb
Walden University

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 Walden University

College of Management and Technology

This is to certify that the doctoral study by

Antonio Ghaleb

has been found to be complete and satisfactory in all respects,

and that any and all revisions required by
the review committee have been made.

Review Committee
Dr. Roger Mayer, Committee Chairperson, Doctor of Business Administration Faculty

Dr. Kevin Davies, Committee Member, Doctor of Business Administration Faculty

Dr. Richard Snyder, University Reviewer, Doctor of Business Administration Faculty

Chief Academic Officer

Eric Riedel, Ph.D.

Walden University
2018
 Abstract

Effective Internal Controls for Recognizing Contracting Revenues

by

Antonio Ghaleb

MBA, Holy Spirit University of Kaslik, 2009

BA, Holy Spirit University of Kaslik, 2005

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of

Doctor of Business Administration

Walden University

April 2018
 Abstract

Business leaders of contracting companies in Qatar struggle to develop appropriate

internal controls over revenue estimates to mitigate the risk of financial statement

manipulation. Grounded in the internal control framework of the Committee of

Sponsoring Organizations of the Treadway Commission, the purpose of this multiple case

study was to explore strategies that business leaders responsible for financial reporting

use to develop and implement effective internal controls for recognizing contracting

revenues. Nine participants from 3 private contracting companies in Qatar who had

implemented strategies to develop and implement effective internal controls for

recognizing contracting revenues participated in face-to-face semistructured interviews.

Through a process of methodological triangulation as described by Yin, observations and

documentary evidence supplemented data collected through semistructured interviews.

Different themes emerged through the analysis of data that involved coding narrative

segments. The research findings included themes of control environment, control

activities, systemized project budget, accounting standards compliance, and risk

assessment and monitoring. Business leaders of contracting companies may benefit from

the findings of this study by gaining awareness of the need to develop and implement

effective internal controls for recognizing contracting revenues. Implications for positive

social change could come from identifying internal controls that increase financial

statement reliability, which could lead to increased access to capital and debt financing

and improved employment opportunities in Qatar.

Effective Internal Controls for Recognizing Contracting Revenues

by

Antonio Ghaleb

MBA, Holy Spirit University of Kaslik, 2009

BA, Holy Spirit University of Kaslik, 2005

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of

Doctor of Business Administration

Walden University

April 2018
 Dedication

I dedicate this study to my wife, Carla Tarraf Ghaleb, for the unwavering support

and sacrifice throughout the doctoral journey. I owe her a debt of gratitude for her

continuous support since the day we met. I also dedicate this study to my supportive and

loving parents, Fares Ghaleb and Yvonne El-Khawaja, who believed in me and supported

all of my life’s endeavors. To my amazing sisters, Darine Ghaleb and Nermine Ghaleb,

and to my lovely brother, Halim Ghaleb. To my extended relatives and friends for their

encouragement. And above all, to my source of inspiration, my adorable kids, Rita-Maria

and Fares-Anthony. I love you all!

 Acknowledgments

I would like to thank my chair, Dr. Roger Mayer, for his tremendous support,

availability, and encouragement throughout my doctoral journey. I am infinitely grateful

for all the advice and recommendations he gave me, a sincere thank you from the heart.

Dr. Mayer, from day one you were assigned as my chair, you helped me move forward

with perseverance and determination. May God continue to strengthen you, keep you in

perfect health, you and your family, and bring you a successful life full of prosperity.

Thank you, Dr. Kevin Davies (second committee member), Dr. Richard Snyder (URR),

and Dr. Freda Turner (retired program director) for your motivation, support, and timely

feedback on my study. It was a blessing to have such a strong and inspiring committee. I

would like to thank all Walden University instructors, classmates, and staff who

contributed to the successful completion of this study. Thank you to all the business

leaders and managers (participants) who took time off their busy schedules to participate

in this study. God bless you!

 Table of Contents

List of Tables ..................................................................................................................... iv

Section 1: Foundation of the Study......................................................................................1

Background of the Problem ...........................................................................................1

Problem Statement .........................................................................................................2

Purpose Statement ..........................................................................................................3

Nature of the Study ........................................................................................................3

Research Question .........................................................................................................4

Interview Questions .......................................................................................................5

Conceptual Framework ..................................................................................................6

Operational Definitions ..................................................................................................7

Assumptions, Limitations, and Delimitations ................................................................8

Assumptions............................................................................................................ 9

Limitations .............................................................................................................. 9

Delimitations ......................................................................................................... 10

Significance of the Study .............................................................................................11

Contribution to Business Practice ......................................................................... 11

Implications for Social Change ............................................................................. 11

A Review of the Professional and Academic Literature ..............................................12

Committee of Sponsoring Organizations of the Treadway Commission ............. 13

Enterprise Risk Management ................................................................................ 32

Project Budget Revenue Recognition ................................................................... 36

Financial Statement Material Weaknesses............................................................ 42

i
 Internal Control ..................................................................................................... 46

Accounting Information ........................................................................................ 54

International Financial Reporting Standards and Accounting Estimates ............. 62

Contracting Field .................................................................................................. 67

Transition .....................................................................................................................70

Section 2: The Project ........................................................................................................72

Purpose Statement ........................................................................................................72

Role of the Researcher .................................................................................................72

Participants ...................................................................................................................76

Research Method and Design ......................................................................................79

Research Method .................................................................................................. 79

Research Design.................................................................................................... 80

Population and Sampling .............................................................................................82

Ethical Research...........................................................................................................84

Data Collection Instruments ........................................................................................86

Data Collection Technique ..........................................................................................88

Data Organization Technique ......................................................................................90

Data Analysis ...............................................................................................................91

Reliability and Validity ................................................................................................94

Reliability.............................................................................................................. 95

Validity ................................................................................................................. 96

Transition and Summary ..............................................................................................98

Section 3: Application to Professional Practice and Implications for Change ..................99

ii
 Overview of the Study .................................................................................................99

Presentation of the Findings.......................................................................................100

Theme 1: Control Environment .......................................................................... 103

Theme 2: Control Activities................................................................................ 106

Theme 3: Systemized Project Budget ................................................................. 112

Theme 4: Accounting Standards Compliance..................................................... 114

Theme 5: Risk Assessment and Monitoring ....................................................... 116

Application to Professional Practice ..........................................................................117

Implications for Social Change ..................................................................................119

Recommendations for Action ....................................................................................120

Recommendations for Further Reseacrh ....................................................................123

Reflections .................................................................................................................123

Conclusion .................................................................................................................125

References ........................................................................................................................127

Appendix A: Interview Protocol ......................................................................................155

Appendix B: Letter of Cooperation From a Research Partner .........................................156

Appendix C: Invitation to Participate ..............................................................................157

Appendix D: Interview Questions ...................................................................................159

Appendix E: Protecting Human Research Participants Training Certificate ...................160

iii
 List of Tables

Table 1. Interview Questions, Themes, and Percentage of Participant References .........102

Table 2. Internal Control Strategies Regarding the Project Budget.................................108

Table 3. Internal Control Strategies to Mitigate the Risk of Financial Statements

Manipulation ........................................................................................................110

iv
 1

Section 1: Foundation of the Study

Internal controls are a critical element of proper revenue recognition. The

Committee of Sponsoring Organizations of the Treadway Commission (COSO), a

voluntary private sector initiative dedicated to improving and enhancing organizational

performance and corporate governance through an effective internal control system,

provides guidance for businesses related to developing a framework of internal controls

(COSO, 2013). Wang and Yu (2015) found that there was a significant relationship

between internal control quality of engineering projects and the sustainability and

corporate value. Managers understand that an ineffective internal control system can

increase the difficulty of achieving a company’s objectives of sustaining profits and

reducing unexpected events (Hajiha & Bazaz, 2016). Martin, Sanders, and Scalan (2014)

outlined the importance of the COSO framework as an accepted framework for

evaluating internal control related to operations, compliance, and financial reporting

(Martin et al., 2014).

Background of the Problem

Business leaders who deal with long-term contracting projects face unique

financial reporting issues related to the accurate reporting of revenue. International

Financial Reporting Standards (IFRS) require reporting revenue based upon the

percentage of completion of a project as of the last day of the reporting year (IFRS,

2015a). When companies issue financial statements outside the United States, they must

follow IFRS general accounting principles (Kumar, 2015). The IFRS accounting

standards require management to assess project budget that is material to the financial
 2
statement results. Without appropriate internal controls, these estimates are susceptible to

manipulation by management (Kapić & Bašić, 2013). Flood (2017) stated that if those in

management want to manipulate their revenues, they might use aggressive cost estimates

when accounting for contracts. Griffith, Hammersley, Kadous, and Young (2015) stated

that auditors consider the accounting estimate related to revenue recognition to be a high-

risk estimate.

Management’s estimate of contract revenue requires a project budget. Thus, the

project budget, developed by management, has a direct effect on the revenue recognition

of a contract. Srivastava (2014) pointed out that revenue is a substantial element in

companies’ financial statements. Revenue recognition decisions in a contracting

company’s financial statements have a substantial effect on understating or overstating

revenue (IFRS, 2015a). The purpose of this qualitative multiple case study was to explore

strategies that business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues.

Problem Statement

Business leaders of contracting companies struggle to develop appropriate

internal controls over revenue estimates to mitigate the risk of financial statement

manipulation (Feng, McVay, & Skaife, 2014). Rahman, Sulaiman, Fadel, and Kazemian

(2016) conducted a survey study of 57 firms with financial statement fraud and

determined that 36.9% of misreported revenue related to discretionary accruals. The

general business problem is that without appropriate accounting policies and procedures

regarding revenue recognition, contracting companies may lose revenue affecting

profitability. The specific business problem is that some business leaders responsible for
 3
financial reporting lack strategies to develop and implement effective internal controls for

recognizing contracting revenues.

Purpose Statement

The purpose of this qualitative multiple case study was to explore strategies that

business leaders responsible for financial reporting use to develop and implement

effective internal controls for recognizing contracting revenues. The population for this

study included an accounting manager, finance managers, a chief internal controller, a

finance controller, an estimation manager, and cost control managers from three private

contracting companies in Qatar who had developed and implemented appropriate internal

controls over revenue recognition. Implications for positive social change could come

from identifying internal controls that increase financial statement reliability, which

could lead to increased access to capital and debt financing and improved employment

opportunities in Qatar.

Nature of the Study

Selecting an appropriate research method depends on the research question,

objective of the study, and current knowledge of the topic (Dasgupta, 2015). The goal of

qualitative researchers is to explore the depth and complexity inherent in phenomena;

qualitative researchers employ a subjective approach to describe life experiences and

provide them with meaning (Yin, 2014). Quantitative researchers analyze numerical data

by employing statistical procedures and make deductive conclusions about the

relationships and differences among variables (Venkatesh, Brown, & Bala, 2013). The

goal of this study was to explore a phenomenon, not to test a hypothesis using numeric

data; thus, I rejected quantitative and mixed methods and adopted a qualitative method.
 4
Onwuegbuzie and Byers (2014) identified numerous qualitative designs, of which

I considered ethnographic, phenomenological, and case study approaches. Ethnographic

researchers study cultures to obtain a full understanding of members’ cultural experiences

(Mutchler, McKay, McDavitt, & Gordon, 2013). A phenomenological researcher seeks to

gain the meaning of the lived experiences of study participants about a concept or

phenomenon. Moustakas (1994) stated that researchers employ phenomenological design

when the objective of a study is to explore participants’ lived experiences. The purpose of

this study was not to explore the culture or lived experiences of participants. Thus, I

rejected both ethnography and phenomenology for the research design. A researcher

using a case study design explores what as well as how or why questions concerning a

process or phenomenon that works within a bounded system (Yin, 2014). The purpose of

the case study design was to explore a bounded system or a case over time through

detailed, in-depth data collection involving multiple sources of information in rich

context. Using a case study design enables a researcher to explore a business-related

bounded system involving a group of people (Dasgupta, 2015). My goal was to explore a

business-related bounded system; thus, I employed a qualitative case study design to

address the purpose of my study.

Research Question

The overreaching research question was the following: What strategies do

business leaders responsible for financial reporting use to develop and implement

effective internal controls for recognizing contracting revenues?

 5
Interview Questions

I used the following interview questions in my qualitative exploratory case study.

Question 1 is the initial problem question, Questions 2-7 represent concept questions, and

Question 8 is my wrap-up question.

1. What internal control framework do you have in place to assure compliance

with revenue recognition accounting standards?

2. What strategies have you used to ensure that the internal controls are

operating effectively regarding contracting revenue recognition?

3. What are the key strategies managers use to develop and implement

appropriate internal controls for recognizing contracting revenues to be able to

mitigate the risk of financial statement manipulation?

4. How do you assess the effectiveness of the strategies for using your budget as

an internal control mechanism to manage projects?

5. How did you address the barriers to implementing the strategies for using

project budget variances as a learning experience to strengthen internal

controls?

6. How does the accounting team validate the reliability and accuracy of revenue

recognition in the financial statements?

7. How does management adapt the internal control system for recognizing

contracting revenues?

8. What else would you like to share about your experiences on the effectiveness

of the internal control regarding contracting revenue recognition?

 6
Conceptual Framework

The Treadway Commission established the COSO internal control conceptual

framework in 1992 outlining professional practices for the development of efficient and

effective internal controls (Moeller, 2014). Since 1992, using the COSO model has

helped companies design, operate, and evaluate the effectiveness of internal controls

(Rose, Sarjoo, & Bennett, 2015). Altheebeh and Sulaiman (2016) defined the five basic

components of COSO: the control environment, risk assessment, control activities,

information and communication, and monitoring. Shapiro (2014) expanded on the

components of the framework:

1. Control environment includes the management’s commitment to integrity,

board of director independence, management accountability, and employee

competency.

2. Risk assessment includes the management’s commitment to business

objectives, risk analysis, fraud risk, and change management.

3. Control activities include the management’s focus on risk mitigation,

technology risk, and effective policies.

4. Information and communication encompass internal communication within

the organization.

5. Monitoring activities include a functioning internal audit department and

continuous evaluation by management.

Internal control includes not only preventing accounting errors, but also

employing an ethical focus on management in designing, implementing, controlling, and

improving business processes (Lakis & Giriunas, 2012). The COSO framework applied
 7
to my study because it provided means for exploring strategies and processes that

business leaders employ in monitoring accounting policies and procedures regarding

revenue recognition to ensure that internal accounting controls are operating effectively.

Operational Definitions

Contracting revenue recognition: Contracting revenue recognition is the stage of

completion of the contracting activity as of the end of an accounting period (IFRS,

2015a).

Discretionary accrual: A discretionary accrual is a change to a company’s

financial position based upon a management estimate (Elshafie & Nyadroh, 2014).

Internal control: Internal control is a process performed by a company's board of

directors, management, and other employees that is designed to provide reasonable

assurance regarding the achievement of objectives in (a) effectiveness and efficiency of

operations, (b) reliability of financial reporting, and (c) compliance with applicable laws

and regulations (COSO, 1992).

International Financial Reporting Standards (IFRS): IFRS is a set of

comprehensive accounting principles that emphasizes real economic transactions

(Kumar, 2015).

Material misstatement: Misstatements or omissions of amounts are material if

they could, individually or collectively, affect the economic decisions that users take by

relying on financial statements (IFRS, 2015c)

Neutrality: With neutrality, auditors maintain professional skepticism while

performing their audits by neither believing nor disbelieving client management

(Quadackers, Groot, & Wright, 2014)

 8
Presumptive doubt: With presumptive doubt, auditors assume a certain level of

dishonesty unless evidence indicates the opposite (Quadackers et al., 2014).

Project budget: Project budget includes all costs that are associated and

attributable directly to the specific project contract (IFRS, 2015a).

Restatement: Financial statement restatement involves correcting the recognition,

measurement, and disclosure of amounts of elements incorporated into financial

statements as if prior-period errors had never occurred (IFRS, 2015c).

Unqualified opinion: An unqualified opinion is an independent auditor's opinion

that a company's financial statements are fairly stated and presented (Public Company

Accounting Oversight Board [PCAOB], 2015).

Assumptions, Limitations, and Delimitations

During the process of conducting my doctoral study, I might encounter inherent

flaws. However, being able to identify such problems and describe them is significant to

any researcher because this process enables researchers to differentiate themselves from

novice researchers and distinguish themselves as doctoral scholar-practitioners.

Assumptions consist of information that a researcher considers accurate but that may be

unproven (Kirkwood & Price, 2013). A limitation is a threat to the validity and reliability

of a study that causes a researcher to provide findings that do not address the research

question or findings that are inconsistent with the objectives of the study (Connelly,

2013). Delimitations define the scope of a study, expressing what the researcher will not

do or consider in the research (Marshall & Rossman, 2016).

 9
Assumptions

Assumptions are research elements that are considered accurate and valid without

concrete proof (Denzin & Lincoln, 2011). Chief financial officers (CFOs) recognize

accounting estimates based upon assumptions of management (Kapić & Bašić, 2013).

Accounting estimates in project budgets expose most contracting companies to the risk of

uncertainty. Thus, there is uncertainty about the accuracy of the figures set in a project

budget, which management uses in making a decision to accept and reject the project.

Further assumptions in this study included the belief that the participants answered

truthfully and that a qualitative case study was an appropriate strategy to research this

topic. Participants had a clear understanding of the accounting estimates and

acknowledged the risk of uncertainties regarding the project budget. Additionally,

participants acknowledged the importance of having effective internal control over

contracting revenue recognition. Wagenhofer (2014) determined that a significant reason

for misestimation of project budgets is that development managers receive huge bonuses

for planning projects based on projected profits, whereas managers who must operate the

projects incur losses because of overoptimistic planning assumptions. I employed well-

established techniques and procedures to collect the data to ascertain the validity and

reliability of the information provided by the participants. However, there was no

absolute guarantee that the data collected from the participants would be free from any

intentional or unintentional error.

Limitations

Limitations are likely weaknesses in a study that are mostly outside the

researcher's control, such as funding limitations, choice of research design, and other
 10
factors (Marshall & Rossman, 2016). In this study, there were potential limitations that

were not within my control as the researcher, including the following:

1. Some participants initially provided inaccurate statements regarding best

practices in response to certain questions; I had to restructure these questions

for purposes of clarity.

2. I noted the following change in accounting standards: IFRS 15 would replace

IAS 11 starting in January 2018. Participants emphasized that the new IFRS

15 had the same application to contracting revenue recognition, with only

immaterial differences from its predecessor.

3. The results were based upon a specific time and therefore may not reflect

future activities.

Ellis and Levy (2009) pointed out that limitations usually flow from the research

method employed in a study. Factors outside the researcher's control may negatively

influence the results of a study. To confirm the results of my study, I recommend that

researchers conduct further research on different populations.

Delimitations

Delimitations are the definitions that a researcher sets as the boundaries of a study

(Marshall & Rossman, 2016). One delimitation of my study was the limited number of

companies, in that the study involved three private contracting companies in Qatar. The

target companies in this study were neither required to disclose detailed information

regarding internal control nor obliged by authorities to disclose such information. The

decision to study three private contracting companies only was a boundary.

 11
Significance of the Study

Business leaders could use the results of this study to identify and implement

appropriate internal controls over contracting revenue, thus increasing the reliability of

financial statements. Investors rely on financial statements when making debt and equity

investment decisions. Furthermore, society can benefit from this study’s findings because

contracting companies represent a significant percentage in the private sector in Qatar.

Hence, increases in financial investments would have a direct effect on employment

opportunities.

Contribution to Business Practice

Business leaders could benefit from the results of this study. The development

and implementation of effective internal controls for recognizing contracting revenues

directly relate to the reliability of financial statements. Revenue recognition is a

significant element of the income statement that measures the financial performance of

the company (Kasztelnik, 2015). Revenue recognition in the contracting sector is

vulnerable to high levels of risk, which can lead to misstating the financial statement and

misleading both internal and external users. Therefore, exploring strategies for

developing and implementing effective internal controls for recognizing contracting

revenues could increase the value of financial statements to accounting managers, CFOs,

auditors, and regulators.

Implications for Social Change

Society could benefit from the results of this study because private contracting

companies represent a significant source of employment opportunities in Qatar (Jarkas &

Haupt, 2015). Kasztelnik (2015) noted that there is a significant increase in the value
 12
relevance of revenue recognition after the adoption of IFRS along with an increase in the

value relevance of accruals. Thus, the results of this study can contribute positively to

social change by enhancing financial statement reliability. Financial statement reliability

can lead to increased access to capital and debt financing, which may increase business

opportunities and improve employment opportunities in Qatar. Furthermore, enhancing

financial statement reliability promotes investors’ confidence in financial statements and

enables investors to make appropriate business decisions, catalyzing economic growth

through capital spending.

A Review of the Professional and Academic Literature

The purpose of the literature review was to explore strategies that business leaders

responsible for financial reporting use to develop and implement effective internal

controls for recognizing contracting revenues. To answer the research question, I

conducted a qualitative multiple case study. The COSO internal control-integrated

framework was the primary conceptual framework. I also considered the enterprise risk

management (ERM) model as an alternative framework as I explored the research topic.

A comprehensive review of professional and academic literature provided me an

opportunity to gain a comprehensive understanding of my conceptual framework and

published literature related to my research topic.

I organized the literature review into several topic headings, including (a) the

COSO framework, (b) ERM, (c) project budget revenue recognition, (d) financial

statements material weaknesses, (e), internal control, (f) accounting information, (g)

IFRS, and (h) contracting field. The literature review included scholarly journal articles

and dissertations found in the Walden University library and Google. The search terms
 13
included internal control, revenue recognition, corporate governance, COSO, ERM,

contracting and construction, and financial statements. The study included 209 sources,

and 94% were peer-reviewed journal articles published in 2013 or later. The literature

review included 71 references, with 67 published in 2013 or later; of these, 65 (91%)

were peer reviewed.

Committee of Sponsoring Organizations of the Treadway Commission

The COSO frameworks originated from a voluntary private sector initiative

dedicated to improving and enhancing organizational performance and corporate

governance through an effective internal control system (Altheebeh & Sulaiman, 2016).

As defined by the Treadway Commission, COSO (1992) frames internal control as a

process effected by the company’s management and other employees that is designed to

provide reasonable assurance regarding the achievement of the company’s objectives in

the following categories: (a) effectiveness and efficiency of the company’s operations, (b)

reliability of financial statements and other financial reporting in the company, and (c)

compliance with applicable laws and regulations. The COSO framework represents the

efforts of five major professional associations in the accounting profession: (a) American

Institute of Certified Public Accountants, (b) Institute of Management Accountants, (c)

Institute of Internal Auditors, (d) American Accounting Association, and (e) Financial

Executives International (FEI; COSO, 2013). According to COSO (2013), the control

environment sets the tone for an organization because COSO covers integrity, ethical

value, employee competence, management’s philosophy, operating cycle, and the

leadership traits of the management and board of directors.

 14
The COSO framework helps business leaders assess a business and its

environment. Altheebeh and Sulaiman (2016) pointed out the five basic COSO

components, which are the control environment, risk assessment, control activities,

information and communication, and monitoring. Shapiro (2014) outlined the main

components of the COSO integrated framework, including (a) control environment,

which includes management’s commitment to integrity, accountability, and competence;

(b) risk assessment, which includes management’s commitment to business objectives,

risk analysis, and change management; (c) control activities, which include risk

mitigation; (d) information and communication, and (e) monitoring activities, which

include continuous evaluation.

The risk assessment component is the identification and analysis of risks in the

company to achieve the objective of having an effective internal control system (COSO,

2013). Rose et al. (2015) highlighted that companies that have an effective and mature

fraud risk assessment could implement it to strengthen their fraud prevention processes

and procedures. Further, Rose et al. indicated that Principle 8 of COSO 2013 addressed

the need to consider the impact of fraud when developing internal controls. Principle 8 of

the COSO framework is similar to the fraud risk requirements embedded in the U.S.

Sarbanes-Oxley Act of 2002, which requires companies to identify fraud controls to

detect and prevent fraud at the transaction level (Rose et al., 2015).

The control activities are the policies and procedures that help to ensure that

management directives are operating effectively and that enable CFOs to ensure the

effectiveness of internal control in the accounting cycle of revenue recognition in

contracting companies (Lin, Wang, Chiou, & Huang, 2014). Lin et al. (2014) pointed out
 15
that CFOs and CEOs have to state in their companies’ financial statements the

effectiveness of internal control for the purpose of enhancing the U.S. capital market, and

Section 302 of the Sarbanes-Oxley Act (SOX 302).

Management frames communication effectiveness through the COSO framework.

Communication effectiveness between leaders and their followers includes a system of

formal and informal communication that generates accurate information that flows

through the organization (COSO, 2013). Management should communicate relevant

information in a specified timeframe to enable individuals to carry out their

responsibilities in the company (COSO, 2013). Agyei-Mensah (2016) found that many

Ghanaian companies did not disclose sufficient internal control information in their

annual financial reports. Independent directors help to improve the quality of internal

control disclosure and increase the transparency of information (Agyei-Mensah, 2016).

The findings connect to my study by showing the importance of having effective

communication, which enables managers to increase the accuracy of budgeting and

revenue recognition.

Part of a control environment is regularly monitoring operating activities to

ensure that the internal controls are operating effectively (Jackson, 2006). Control

environment, risk assessment, control activities, information and communication, and

monitoring are significant factors that enable business leaders to develop strategies to

ensure the effectiveness of internal control in contracting revenue recognition. For the

process and objective of internal control to be perceived as viable and effective, all of the

financial statements generated by management must be genuine, and accurate (Chung &

McCracken, 2014). McCarthy and McCarthy (2014) found that applying rules-based
 16
accounting standards provides less accurate revenue decisions. Shifting from rules-based

accounting standards to principles-based accounting standards requires more professional

judgment regarding the decisions of the financial statements’ preparers in the areas of the

estimate, uncertainty, and inherent subjectivity (McCarthy & McCarthy, 2014).

McCarthy and McCarthy also found that the mean recommended revenue amounts were

higher in both the rules-based accounting standard and principles-based accounting

standards when the personal incentive was not present.

External auditors play a significant role in developing audit programs that meet

the objective of the Sarbanes-Oxley (SOX) Act regarding the effectiveness of internal

control. Martin et al. (2014) conducted a survey of members of the Institute of the

Internal Auditors (IIA) to report the extent of internal auditors’ use of a structured audit

program in compliance with SOX, as well as the extent of external auditors’ involvement

in the development of audit programs. Martin et al. outlined the importance of the COSO

framework for companies to evaluate internal control related to operations, compliance,

and financial reporting. Further, Martin et al. pointed out that the revised COSO

framework in 2013 brought fraud risk assessment explicitly to the 17 stated principles.

Martin et al. also described the link that unstructured and structured audit work programs

have with SOX compliance and the effectiveness of internal control. Martin et al. found

that internal audit departments apply for structured audit programs, and external auditors

are regularly involved in developing these programs. However, Martin et al. observed

that a structured audit program is inflexible and insufficient to detect fraud. Martin et al.

employed a quantitative survey to collect data from IIA members who worked in internal
 17
audit departments. This survey study is relevant to internal and external auditors as they

evaluate the advantages and disadvantages of structured and unstructured audit programs.

Martin et al. (2014) determined that an audit requires structure and an overall

framework. Further, Martin et al. outlined the extent of reliance on internal auditors to

ensure the effectiveness of internal control over financial reporting when performing their

audits. Martin et al. described the involvement of external auditors to support

management assertions regarding the effectiveness of internal control over financial

reporting. Martin et al. further explained the objective of external auditors’ involvement,

and to what extent they can rely on internal auditors. Rose et al. (2015) discussed how to

adopt the updated COSO 2013 internal control integrated framework to prevent or

mitigate the risk of fraud through a fraud risk assessment. Rose et al. highlighted that

companies that have an effective and mature fraud risk assessment can implement the

framework to strengthen their fraud prevention processes and procedures. Rose et al.

indicated that the discussion of fraud in COSO 2013 centers on Principle 8 in which

management must consider the potential for fraud in assessing risks for the purpose of

meeting their objectives. Rose et al. stated that COSO requires a strong and stringent

internal control foundation that addresses fraud broadly to encompass the firm’s

objectives as part of its strategy, operations, reporting, and compliance with applicable

laws and regulations.

Principle 8 of the COSO framework includes the following: (a) fraudulent

financial reporting, (b) fraudulent nonfinancial reporting, (c) illegal acts, and (d)

misappropriation of assets. Rose et al. (2015) articulated that some companies have

written policies and procedures to manage individual fraud components, but many of
 18
them do not concisely summarize these documents and activities to be able to

communicate and assess the completeness of their fraud management processes. Rose et

al. stated that the internal auditor could help management address the areas of fraud and

ensure that risk assessment is effective and adequate. Moreover, Rose et al. pointed out

that the risk assessment process starts with a brainstorming session with management and

employees to unveil potential fraud risks without consideration for mitigating controls.

Management should assess each risk area, including information technology risk, fraud

schemes, incentive compensation programs, pressures on CFOs to reach a certain

revenue, and opportunities for executives with override abilities to identify any inherent

risk. Rose et al. highlighted that segregation of duties in small companies is difficult for

management because of a limited number of employees. Therefore, management has to

overcome this limitation by implementing compensation controls such as budget to actual

analysis and regular investigation of unusual activity and identified risk areas. Companies

that have adopted COSO 2013 can continue with that foundation to prepare for fraud

challenges. Companies that have not adopted COSO 2013 should reconsider their

strategy and adopt it to improve the internal control system to identify, detect, and

prevent fraudulent activity.

The COSO integrated framework plays a major role in mitigating illegal financial

transactions. Altheebeh and Sulaiman (2016) conducted a quantitative correlational study

to determine the impact of COSO on reducing illegal financial transactions in 13

branches of commercial banks listed on the Amman Stock Exchange. Using

questionnaire data collected from 33 managers, Altheebeh and Sulaiman found a positive

association between the independent variables (control environment, risk assessment,

 19
control activities, information and communication, and monitoring) and the dependent

variable (money laundering). Altheebeh and Sulaiman found that the most effective

component was information and communication, followed by risk assessment, control

activities, control environment, and monitoring. Altheebeh and Sulaiman recommended

improving the control environment component in the commercial bank because it creates

the mood that enables employees to assume their control responsibilities, including

interest in employee’s competence, ethical values, and management philosophy to be able

to limit many laundering transactions.

Revision to the initial COSO integrated framework in 1992 was an effective move

toward a comprehensive framework that enables management to enhance the internal

control of companies. Rittenberg (2013) discussed the importance of the revised COSO

integrated framework for 2013 in guiding the implementation process, which helps

practitioners to establish an effective internal control system at a lower cost if

implemented adequately. Numerous major companies have failed during the last 20 years

because their risk management and internal control systems were ineffective.

Rittenberg (2013) discussed the factors that influenced the COSO board’s

decision to revise the integrated framework. To name a few, these factors included (a)

changes in technology and connected risks, (b) changes in corporate governance, (c)

increased demand for internal control information, (d) increased focus on risk

assessment, and (e) increased significance of compliance and operation objectives.

Further, Rittenberg highlighted the essential differences between the old and new

revisions. Rittenberg highlighted the revised points in the new version (COSO 2013) as

follows: (a) reporting objectives encompass both financial and nonfinancial reporting
 20
according to the revised COSO 2013; (b) principles and points of focus assist

management in designing and implementing an internal control system, as well as

evaluating whether the relevant principles are in fact present and functioning effectively;

(c) and assessing the effectiveness of governance structure in the companies.

COSO 2013 consists of 17 principles developed around the 1992 integrated

framework’s five components. These 17 principles set further control on individuals’

competence and hold them accountable for their role in accomplishing internal control

objectives. Fraud risk consideration is not limited to financial statements only; it includes

compliance and operational risk assessment. IT control is considered explicitly because

companies are relying on cloud computing. COSO 2013 places further emphasis on the

need for judgment in evaluating whether a company achieves an effective internal control

system. Further, COSO 2013 reasserts the importance of compliance and operational

objectives and presents opportunities for internal audit to broaden its value proposition.

Rittenberg (2013) noticed four significant changes:

1. Changing the financial reporting objective to encompass nonfinancial

reporting objectives that mirror reporting techniques since 1992.

2. The principles-points of focus approach emphasizes the control environment

and good governance.

3. Greater emphasis on operations and compliance objectives.

4. Increased complexity in companies' structure, governance, and other

relationships.

Rittenberg explained how the revised framework's illustrative tools help

practitioners. Rittenberg stated that the illustrative tools are designed to stimulate thought
 21
through different examples by enabling practitioners to think about what they can

accomplish and how they might design the internal control structure to meet the

objectives efficiently.

The internal audit department plays a significant role in a company’s fight against

fraud. Laxman, Randles, and Nair (2014) discussed the importance of having an internal

audit department. Laxman et al. (2014) outlined that companies lose around 5% of their

revenues due to annual fraud. Laxman et al. explored an internal audit project team in

Hewlett-Packard (HP) that developed a successful fraud mitigation program (FMP).

Accordingly, Laxman et al. found that FMPs are an evolving topic that helps internal

audit project teams monitor the firm's risk mitigation environment. Laxman et al.

highlighted that fraud is a threat to any company, particularly affecting complex

companies that are operating with multiple business units and globally. The internal audit

project team that conducted a case study in HP drove program development with

guidance and surveillance from a steering committee that consisted of a corporate

controller, chief audit executive, chief ethics officer, and compliance officer.

Accordingly, Laxman et al. outlined that based on the five components of the COSO

integrated framework, the internal audit project team developed the FMP. The internal

audit project team applied a pilot assessment, and according to its results, Laxman et al.

formed a methodology to efficiently address fraud risks by evaluating the functions that

supported high-risk processes across of the company’s businesses. The functions ranked

according to the level of risk and the project team considered factors of the risk

mitigation environment such as past fraud events, exposure to management override, past
 22
audit issues, dollars spent, level of third-party interaction, and previous fraud risk and

control assessments.

The COSO integrated framework reflects its importance regarding strengthening

the internal control system of the companies. Moeller (2014a) discussed the importance

of COSO internal control framework. In this executive summary, Moeller outlined that

internal controls are an integral part of a firm’s governance system. Further, Moeller

highlighted that an effective internal control system helps to create, enhances, and

protects shareholders’ value as well as to counter the threats to take on additional risks

and achieving the company’s objectives. An adequate internal control assists the

management to ensure that the accounting transactions are properly authorized,

supporting Information technology systems are properly managed, and the information

recognized in the financial reports are reliable. Further, an effective internal control is a

process that helps the management and its related departments to mitigate any potential

accounting errors, illegal acts, and irregularities. Internal control systems cannot

eliminate all the accounting errors or irregularities in the company, but they can alert the

management regarding any potential problem (Moeller, 2014).

Moreover, internal control systems are not merely associated with functions

related to the accounting and finance departments. However, there are policies and

procedures set by the management within the company to increase the business value and

mitigate risk. Moeller (2014b) discussed in the relevant article the basic concepts of the

risk assessments component of the COSO internal control integrated framework. The

purpose of this paper is to explore the significance of risk assessments component

because risks affect the company's ability to succeed, compete within its industry, sustain
 23
its financial strength and positive reputation, and sustain the overall quality of its

products, services, and people. Moeller (2014b) outlined that there is no practical way to

reduce risk to zero because all business activities involve some amount of risk. Chappell

(2014) explained that the goal of management is to manage risk, not to eliminate risk.

Moeller (2014b) stated that while the risk assessments component of COSO has not

changed significantly since the original framework, guidance on internal controls has

undergone significant revisions.

Moeller (2014b) pointed out that management should establish and tailor its risk

management processes following the four principles detailed as follows: (a) the firm

specifies objectives with enough clarity to enable the identification and assessment of

risks correlating to its objectives, (b) the firm identifies risks to the accomplishment of its

objectives across the company and analyzes those risks as a basis for ascertaining how

the risks should be managed and controlled, (c) the company considers the possibilities

for fraud in evaluating risks to the accomplishment of objectives, and (d) the entity

identifies and evaluates changes that could significantly affect the performance of its

internal controls. Further, Moeller (2014b) highlighted that company's risk assessments

should cover (a) operations, (b) compliance activities, and (c) reporting needs.

Concerning COSO risk assessment operations objectives, the main area of concern for

many companies is the need to consider tolerances for risk as discussed by Moeller.

Further, Moeller (2014b) outlined that another risk management term sounds important

but is often difficult to define, risk tolerance can be defined through two basic questions;

(a) how much can the enterprise afford to invest to accomplish its goals, and (b) how

much is the company prepared to lose. Nevertheless, the board of directors’ best
 24
addresses those two significant questions, only after the top management has an

understanding and an agreement about the company's risk attitude or risk philosophy.

Risk assessment operations objectives should reflect management’s choices about

structure, industry consideration, and company's performance. Management should use

these operations objectives as a basis for allocating resources required to achieve desired

operations and financial performance. While Moeller (2014b) focuses more on

operational risks, management has to give similar levels of attention to compliance and a

combination of internal, external financial, and external nonfinancial reporting risks.

When building an effective internal control processes, following the COSO framework, a

form needs to build effective risk management and assessment processes.

Financial risks are becoming more diverse because of the increased number of

international transactions. Fang (2016) pointed out that the financial risks are becoming

more diverse due to the increased number of global economic integrations between

international companies. The purpose of Fang’s paper was to understand the network

marketing performance evaluation index system, using an experimental design of

interval-valued intuitionistic fuzzy sets. The interval-valued intuitionistic fuzzy sets

generalized mixed weighted aggregation operator to calculate the risk evaluation value of

various companies. Fang outlined that using interval-valued intuitionistic fuzzy sets can

describe some parameter values in greater detail than other index values. Fang found that

companies should establish an effective internal control system, strengthen the evaluation

and control of risk. Further, Fang highlighted that assessing the risk of the companies in

real time is necessary. To be able to evaluate the companies' risk, Fang built the

evaluation index system, which affects the impact of firms' risk assessment. Fang
 25
evaluated the risk of four marketing companies of China. The index data are known and

arranged in the form of interval-valued intuitionistic fuzzy sets. Fang calculated the

weight by using subjective and objective comprehensive weighting method, and then

assessed the risk of each company by using interval-valued intuitionistic fuzzy sets

generalized mixed weighted aggregation operator, which make the companies understand

their and competitor’s risk situation, and make corresponding analysis, so that raise the

corresponding strategy. The results revealed by Fang made sufficient consideration of the

financial risk, credit risk, human resources risk, and market risk. Evaluation index system

is detailed as follows: (a) financial risk, which includes the critical income from

operation, degree of financial leverage, and interest bearing debt ratio; (b) human

resource risk, which comprises two aspects of employees' turnover rate and staff

compensation satisfaction; (c) market risk, which includes the market share, market

competition degree, and product life cycle; and (d) credit risk, which includes the service

enterprise overdue loan repayment rate, and complaint rate. This assessment includes

financial and non-financial evaluation system.

A balanced scorecard (BSC) is not merely a management system but is a strategic

management system that stresses on strategic implementation. Wisutteewong and

Rompho (2015) stated that BSC focuses on four perspectives: financial, customer,

internal business processes, and learning and growth. Therefore, Wisutteewong and

Rompho employed a structural equation modeling (SEM) to examine the relationship

between successful BSC and an effective COSO, ERM framework in Thai listed

companies. Wisutteewong and Rompho posited that the objectives of this study were: (a)

to investigate the relationship between a successful BSC implementation and an effective

 26
COSO ERM system, (b) to investigate an effective ERM by employing eight components

of COSO ERM, which are internal environment, objective setting, event identification,

risk assessment, risk response, control activities, communication, and monitoring, and (c)

to investigate the success of BSC implementation as measured by best-practice standards

of the Strategy-Focused Organization. Wisutteewong and Rompho found a positive

relation between a successful BSC implementation and an effective COSO ERM.

Wisutteewong and Rompho stated that management should take into consideration the

combined approach of these management tools, which are BSC and COSO ERM to be

able to realize full benefits. In addition, the results revealed that to protect the

shareholders' value, management should adopt a proper integration between BSC and

appropriate risk management.

The adoption of Control Objectives for Information and Related Technology

(COBIT) framework together with the COSO framework enables managers to implement

an effective internal control in IT and other categories of material weaknesses over the

financial reporting. Rubino and Vitolla (2014) in their conceptual paper highlighted the

relationship between COBIT and COSO framework, by illustrating how the COBIT

processes mitigate the material weaknesses in internal control system. The purpose of this

paper was to show the improvements of internal control over financial reporting to

mitigate the material weaknesses when COBIT framework is integrated with COSO

framework. Rubino and Vitolla found that these material weaknesses can be mitigated

and overcome by using the COBIT framework. Rubino and Vitolla found that the

analysis indicated that the implementation of the COBIT framework, or the adoption of

effective and adequate IT controls with COSO framework, provides significant benefits
 27
to the entire company. Moreover, the application of COBIT provides further

improvements regarding the reliability of financial reporting. The paper prepared by

Rubino and Vitolla addressed a significant subject, which is considerably helpful to both

practitioners and academics and also expands existing accounting literature. It shows how

the IT processes are significant in the company and how their integration with the internal

control of other categories reduce the material weakness and, therefore, affect the

reliability of financial reporting.

Corporate governance. The main objective of the corporate governance is to

increase the value of the company and enhance the shareholders/partners equity, hence

strengthen the internal control of the companies. Companies that insist on the highest

standards of governance mitigate many risks that arise from daily operations; then these

companies are able by better performance to attract further investors whose investments

in the company may help to further growth and development (Odorovic, 2013). Guo,

Huang, Zhang, and Zhou (2015) found that material weaknesses in internal control were

mitigated when the management establishes more employee-friendly policies than their

counterparts with fewer employee-friendly policies. Further, Guo et al. (2015) outlined

that the appropriate worker-friendly policies considerably mitigate the propensity for

financial restatements, especially for those driven by unintentional errors. This process

implies that treating the employees with good corporate governance, improving their

knowledge and experience through regular training and coaching, keeping their morale

up and motivated, will have a positive effect on the internal control processes, which in

turn mitigate the financial statements restatements caused by intentional or unintentional

accounting errors. Further, Odorovic (2013) found that the level of implementation of
 28
corporate governance was positively correlated with the performance of companies.

Odorovic outlined that the companies should follow the best practice of corporate

governance to attract investors and raise finance at a lower price. Odorovic highlighted

that to determine the results of corporate governance, entities from the Republic of

Srpska use net profit margin and earnings per share to analyze and compare to findings

for entities from Austria. The results showed that entities with a higher implementation of

corporate governance principles have a higher net profit margin and earning per share.

Companies with a lower level of implementation of corporate governances have a lower

net profit margin and earnings per share (Odorovic, 2013). These results indicate that

companies should adopt good corporate governance to be able to sustain the companies'

profitability and sustainability (Odorovic, 2013).

Good corporate governance will have a positive effect on the employees’

performance, which in turn performs effectively and efficiently in the company

(Odorovic, 2013). Good corporate governance ensures the sustainability of the company

through continuous increasing of the profit, which affects the equity of the company and

increases its value to the stakeholders (Odorovic, 2013). The financial ratios enable the

management to assess the financial situation of the company, competency of the

employees, and accordingly monitor its objective and strategy regularly to be able to

sustain its business (Odorovic, 2013). A company sustains and increases profitability,

improves its credibility, reputation, and competitiveness and improves relations with key

stakeholders such as investors, suppliers, partners, employees, regulators, and customers,

through appropriate use of the principles of corporate governance (Odorovic, 2013). In

addition, Odorovic (2013) highlighted that companies that insist on the highest standards
 29
of governance mitigate many risks that arise from daily operations; then these companies

are able by better performance to attract further investors whose investments in the

company may help to further growth and development.

The main objective of corporate governance is to increase the value of the

company and enhance the shareholders/partners equity. Hence, to be able to meet this

objective, every company's management has to know how to implement good corporate

governance, through recruiting managers who possess the transformational leadership

trait (Mandzila & Zeghal, 2016). Corporate governance is an essential element of the

control environment, which is one of the main components of COSO (Odorovic, 2013).

Moreover, good corporate governance can help the companies to prevent entities

scandals, and possible civil and criminal liability of companies, and fraud (Odorovic,

2013). Further, good application of corporate governance enhances the companies' image

and reputation in the market and then attracts further investors, suppliers, customers, and

other stakeholders. Accordingly, Odorovic (2013) stated that the most important aspects

for investors, when they decide to make an investment, is to check the level of

implementation of corporate governance principles, which are public disclosure of

information, shareholders right and equal treatments along with profitability that ensures

return on investment (Odorovic, 2013).

Mandzila and Zeghal (2016) conducted an empirical study on 109 French public

companies to examine the level of compliance of the French Société des Bourses

Françaises (SBF) 120, which include disclosure requirements on corporate governance,

internal control, and risk management. Mandzila and Zeghal revealed that managers use

an integrated approach to reporting about their corporate governance and risk

 30
management practices. Further, Mandzila and Zeghal found that the mandatory nature of

the legislation did not transpose in extended disclosures regarding internal controls and

risk management practices, except banks because they are subject to a more stringent

regulatory standard.

An effective corporate governance mechanism can mitigate agency problem,

handle effectively shareholders' issues, improve internal control, and maintain a balance

between the principals and agents in the companies. According to Hassan and Marimuthu

(2015), agency problems in organizations result in decreased performance. One of the

primary reasons why conflict arises is that work agreements between principal and agent

are imperfect because not every single contingency can be accounted for; monitoring is

difficult and costly, and then, the principal may have difficulty enforcing their property

rights (Hassan & Marimuthu, 2015). The topic of corporate governance, which is a

significant part of COSO framework embeds the substance of agency theory. Agency

theory plays a significant role in interpreting the relationship between the principal and

agent, who might not act in stakeholders’ best interests. My objective in the next

subsection is to explain the importance of agency theory as it relates to the COSO

framework.

Agency theory. Researchers in agency theory discuss highlight the importance of

corporate governance. Mustapha (2014) related the monitoring component of the COSO

framework to the governance aspect of agency theory. Bendickson, Muldoon, Liguori,

and Davis (2016) conducted an exploration study to explore how agency theory emerged

from some economic and social developments. According to the Bendickson et al. two

forms of agency theory have developed: positivist and principal-agent. In large

 31
organizations, positivist researchers have emphasized governance mechanisms primarily

(Bendickson et al., 2016). For example, Hassan and Marimuthu (2015) pointed out that to

minimize agency costs, protect shareholders' interests, and ensure agent-principal interest

alignment, agency theorists direct various governance mechanisms. Hassan and

Marimuthu (2015) concluded that these mechanisms are usually focused on executive

compensation and governance structures.

Researchers use the principal-agent theory to detail the specifics of the

relationship between principals and agents. The focus of principal-agent theory is to

determine the optimal agreement between principals and agents. Principals delegate work

to agents, expecting that agents will complete these demands in the principals’ best

interest (Hassan & Marimuthu, 2015). Bendickson et al. (2016) highlighted that agency

theory is based on the relationship between one party, the principal, who assigns certain

tasks, responsibilities, and decisions to another party, the agent. In addition, according to

Abdullah, Murad, and Hasan (2015), the focus of agency theory derives from

assumptions that the agent will behave opportunistically, especially if their interests

conflict with the principal and causing an agency problem. Hence, further attention and

monitoring must be directed to resolve this conflict when different interests arise.

However, these differences are difficult to measure and require governing mechanisms to

facilitate congruence and shared risk. One of the primary reasons why conflict arises is

that work agreements are imperfect because not every single contingency can be

accounted for; monitoring is difficult and costly, and then, the principal may have

difficulty enforcing their property rights according to the authors (Abdullah et al., 2015).
 32
Enterprise Risk Management

Managers apply the ERM framework to contribute to an effective internal control

system. Edmonds, Edmonds, Leece, and Vermeer (2015) posited that COSO 2004

develops an integrated framework for ERM, which is built on the board’s role in risk

oversight and provides guidance regarding the responsibilities of board’s risk oversight.

Brustbauer (2016) conducted an empirical study to analyze ERM in small and medium

enterprises (SME). Brustbauer revealed that larger companies are more likely to have a

more developed ERM and that family-owned company have fewer incentives to

implement ERM. Further, Brustbauer revealed that the applied ERM approach affects the

company's strategic orientation; while an active ERM approach results to lead to a more

offensive strategic orientation, a passive ERM approach may appear in a more defensive

strategic orientation. Thus, the analysis revealed that the success key for SMEs is an

awareness of company-related risks; being cognizant of risks is the prerequisite for ERM

activity. Though entrepreneurs are familiar with their businesses; however, they are

unlikely to be able to identify all related risks. Hence, a strong ERM approach may help

them identify, assess and monitor risks, raise their risk knowledge and facilitate them in

better understanding and adjust to the prevailing environment.

Brustbauer (2016) indicated that following an active ERM approach may support

small business entrepreneurs in exploring strategic advantages thus, enhancing the

competitiveness and business success of their companies. Brustbauer analyzed ERM

activity in SMEs along three dimensions: risk identification, risk assessment, and risk

monitoring. Further, each of these dimensions included four items, termed ERM

classifying items. Edmonds et al. (2015) conducted an empirical analysis in their study to
 33
examine whether changes in the quality of risk management are connected with changes

in earnings volatility. Edmonds et al. posited that corporate risk management attempts to

identify risk exposures and determine a response strategy to either bear or manage the

risk. Zhao, Hwang, and Low (2015) identified critical drivers and hindrances to ERM

implementation to be able to compare the influence of these factors on ERM

implementation between large and small-medium enterprises in Chinese construction

firms (CCFs) in Singapore. Zhao et al. (2015) found a total of 13 drivers and 22

hindrances, which are critical to ERM implementation of the CCFs in Singapore. The top

influential driver was the improved decision making, whereas insufficient resources such

as time, money, and people were the most important hindrances (Zhao et al., 2015).

Further, Edmonds et al. (2015) found that if companies implement effective

quality risk management systems, then they could achieve lower earnings volatility. In

addition, Edmonds et al. pointed out that findings provide evidence as to how companies

achieve market performance through a framework of quality risk management and offer a

reason why firms should allocate resources toward risk oversight. In addition, Edmonds

et al. outlined that their results suggest that recent public policy initiatives to enhance risk

management practices have substantive rather than superficial benefits to external

stakeholders. Also, companies that incur losses might benefit more from improving risk

management practices through an earnings variance reduction (Edmonds et al., 2015).

Stakeholders that lose confidence in a firm's ability to continue as a going concern

can lead to lower customer revenues together with tightening the suppliers' credit

requirements and employee turnover. Aziz, Manab, and Othman (2016) conducted a case

study, which aims to provide an insight of the Malaysian experience regarding risk
 34
management practices in the companies along with the integration of the sustainability as

part of the ERM. Aziz et al. emphasized on the sustainability risk management (SRM) as

part of corporate strategy and found that SRM is not merely affecting the firm's financial

performance but also maintaining the longer term of survival in the industry. The

Malaysian listed companies, particularly in plantation industry, realized the significance

of SRM as for good business practices (Aziz et al., 2016). Moreover, large and small-

medium enterprises of the CCFs agreed on the rankings of drivers and hindrances, though

notable differences in the mean scores of seven drivers and four hindrances respectively

(Zhao et al., 2015). Lack of perceived value or benefits was the second most notable

hindrance, after the insufficient resources such as time, money, and people (Zhao et al.,

2015). The results revealed that CCFs, which are operating in Singapore, did not perceive

enough value or benefits of ERM that motivated them to implement ERM (Zhao et al.,

2015). Further, improved internal control of the company over its projects was ranked

fifth, indicating that CCFs based in Singapore executed ERM for better adequate control

of their construction projects (Zhao et al., 2015). Few studies have attempted to disclose

the factors driving and hindering ERM implementation in construction firms, although

the numerous studies prepared according to ERM in various sectors (Zhao et al., 2015).

Hence, this study filled a gap in the existing literature relating to ERM. Further, a

thorough understanding of the drivers for ERM implementation allows the management

to gain sufficient support for the ERM program as well as strengthening the positive

influence from the drivers (Zhao et al., 2015). The identification of the hindrances

enables the management to be definite about the challenges encountered by the ERM

program and take further measures to mitigate their negative influence and overcome
 35
them (Zhao et al., 2015). In addition, Aziz et al. found that the adoption of SRM is not

only driven by corporate governance compliance, however, because of good business

practices, and improved decision making (Aziz et al., 2016). Thus, improving risk-based

decision making is the reason for construction’s companies to adopt SRM (Aziz et al.,

2016).

The integration of SRM into the business plan would help Malaysian companies

to manage environmental, social and financial risk efficiently. In essence, the

sustainability encourages the better lives for people, preserve the world’s environment as

well as ensure the longer term of company’s survival. Moreover, sustainability has been a

paradigm shift in the business operations because the environmental perils lead to the

sustainability development. Mustapha and Adnan (2015) conducted a case study to

explore the implementation of ERM in the Malaysian construction companies. The

results suggest that the awareness and understanding of the ERM concept by the

companies' employees are the significant factors in assuring a successful ERM

implementation because the employees will be the first people in the company to

experience such risks due to their day-to-day operations. Moreover, Mustapha and Adnan

found that participation from all level of employees together with the commitment from

the top management is critical to ensure its successful implementation. Also, Mustapha

and Adnan found that continuous monitoring and maintenance of a risk management

exercises are significant in managing risks effectively.

Contracting companies can use an ERM model to frame decisions regarding the

planning and construction of projects. Mafrolla, Matozza, and D'Amico (2016) examined

the influence of private companies’ ownership structure on the adoption of ERM

 36
practices in Italy. Mafrolla et al. found greater ERM development where ownership is

more dispersed, revealing that ERM plays a significant role in protecting minority

shareholders. Further, ERM is better developed in public-owned firms but is less well

developed in family-owned companies. Thus, Mafrolla et al. pointed out that the

ownership's type has a significant role in the development of ERM in private companies,

considering that ownership concentration in the hands of a stronger main block-

shareholder is a disincentive to the adoption of better ERM practices. Choi, Ye, Zhao,

and Luo (2016) conducted in their paper a literature review and critical analysis of the

work of Wu and Olson, from the viewpoint of the ERM, to gather implications and

suggestions for the customization and optimization of the ERM. Businesses exist to cope

with risk as companies are encountering a great deal of daily environmental changes.

Further, risk creates opportunities as well as threats. The results revealed that by

identifying and managing risks, then management can mitigate the risk impact on an

enterprise because the risk itself is an undesirable outcome and potential loss (Choi et al.,

2016). A risk is strongly related to uncertainty, and hence ERM can be defined as an

activity employed to identify, assess, and evaluate potential outcome, and as a result

suggest the optimal path for risk management (Choi et al., 2016).

Project Budget Revenue Recognition

Revenue is a significant element of the financial statement, which its users rely on

in order to make an economic decision. Kasztelnik (2015) highlighted that revenue is one

of the most commonly used as a benchmark for determining the performance of revenue

recognition in the companies. The objective of financial statements is to provide accurate

information about the financial position, statement of income and cash flows of an entity
 37
that is useful to a wide range of users in making economic decisions (IFRSb, 2015). In

Qatar, the application of IFRS is mandatory according to the Qatari income tax law

(Ministry of Finance, 2015). Thus, the recognition of revenue in both the financial

statements and tax declaration should meet the requirements of the International

Accounting Standards (IAS) 11. Recognizing revenues according to IAS 11, implies the

transactions are subject to an estimation value calculated by the management and may

lead to manipulation caused by overstating or understating the revenue. Estimation

managers calculate the project budget on the basis of entire costs of this specific project

according to the International Accounting Standard 11(Malaj & Shuli, 2015).

Accordingly, due to the uncertainty of estimating reliable financial information while

recognizing the revenue in the contracting sector, the risk of manipulating the accounting

transactions by overstating or understating the revenues to meet the management needs is

considered high; thus, management must ensure proper internal control strategies over

financial reporting. Rose et al. (2015) pointed out that by using the percentage of

completion method, the result will be more accurate regarding the revenue recognition.

Using the percentage of completion method, financial statements will reflect the yearly

profitability or loss of the company (Tunçez, 2015). Kacmar and Tucker (2014) outlined

in their study that management integrity is measured by the outcome of related-party

transactions, financial position ratios, statement of income ratios, and revenue

recognition. The measurement of revenue in the contracting contract affected by various

uncertainties depending on the consequences of the future events (Tunçez, 2015).

Further, the budget of the contracting projects has a direct effect on the revenue

recognition. Moreover, the substantial issue in the accounting practice of the contracting
 38
and construction field is to know how to recognize the revenues and allocate expenses

within the scope of a contract (Tunçez, 2015). When the ends, and uncertainties are

solved, then management reviews estimated compared to actuals revenues and adjusted

the records accordingly (Tunçez, 2015). Thus, revenue recognition in the contracting

sector is vulnerable to an intentional and unintentional error at the highest level in the

financial statements since the finance department recognizes revenue according to IAS 11

(IFRSa, 2015).

The effectiveness of internal control together with good corporate governance is

significant to be able to detect any material weakness that might affect the financial

statements adversely. Kasztelnik (2015) pointed out that there is a significant increase in

the value relevance of revenue recognition after the adoption of IFRS along with an

increase in the value relevance of accounting accruals. Jarkas and Haupt (2015) outlined

that errors and omissions in design drawings might lead to further cost in the budget for

the project. Further, contractors underestimate of contracting cost, and poor performance

of subcontractors might cause considerable penalties, which affect the project budget

(Jarkas & Haupt, 2015).

As managers comply with SOX, a significant part of their activity relates to

enhancing the internal control over financial reporting. Knott (2012) discussed in the

relevant paper the implementation of SOX regarding enhancing internal controls over the

financial reports. Further, Knott outlined the effect of revenue recognition on the

profitability of the public held companies. In his research design, Knott raised the issue of

the accuracy of financial statements before and after the implementation of the SOX Act

and the changes this act has made to the recognition of revenue and its effect on the
 39
financial position and statement of income. In his quantitative experimental study, Knott

examined the financial ratios analysis and other cash-flow measures to determine the

reliability of revenue recognition and investment expectations before and after the

implementation of SOX Act. Results showed that cash/total assets and net credit

sales/average accounts receivable improved after the implementation of the SOX Act

(Knott, 2012). McCarthy and McCarthy (2014) conducted in their study an experiment

instrument to examine the finance managers’ revenue decisions under principles-based

accounting standards, which are perceived to be IFRS compared to the rules-based

accounting standards, which are perceived to be US accounting standards with and

without a personal incentive to maximize revenue for each standard. McCarthy and

McCarthy found that applying rules-based accounting standard provides less accurate

revenue decisions. Shifting from rules-based accounting standards to principles-based

accounting standards requires more professional judgment regarding the decision of the

financial statements’ preparers in the areas of the estimate, uncertainty, and inherent

subjectivity. Further, McCarthy and McCarthy found that where the personal incentive

was not present, the mean recommended revenue amounts were higher in both the rules-

based accounting standard and principles-based accounting standards.

The new IFRS 15, which replaces IAS 11 and IAS 18 simplifies the mechanism

accountants have to apply while preparing the financial statements. Berchowitz and

Whitehead (2014) discussed in their articles the implication of the introduction of IFRS

15, the new awaited global standard on the revenue recognition. Whitehead outlined that

the new IFRS will affect the majority of the companies that generate revenues and

especially, the sectors such as contracting, media, and telecommunications. Huefner

 40
(2015) pointed out that the unbundled goods and services with transfer standard pricing

are less affected by the new reporting revenue standard as compared to bundled goods

and services such as software, contracting, telecommunication, financial services. In

addition, businesses with long production cycle are most affected by the new standard

(Huefner, 2015).

IFRS 15 was scheduled to be effective by the 1st of January 2018 and it will

replace the following standards and interpretations; IAS 18 Revenue, IAS 11 Construction

Contracts, Standard Interpretations Committee (SIC) 31 Revenue – Barter Transaction

Involving Advertising Services, International Financial Reporting Interpretations

Committee (IFRIC) 13 Customer Loyalty Programs, IFRIC 15 Agreements for the

Construction of Real Estate and IFRIC 18 Transfer of Assets from Customers. By

adopting IFRS 15, for all contracts with clients, management should recognize revenue

when control of the promised goods or services is transferred to the contractor, not when

risks and rewards are transferred to the contractor. Berchowitz and Whitehead outlined

that upon adoption of IFRS 15 the measurement of the total contract consideration and

how it is broken into multiple elements deliverable under a single contract will also

change for many companies. Further, by adopting IFRS 15, management should increase

the volume of disclosure comparing with previous relevant standards. Also, the company

has to determine that a contract is within the scope of IFRS 15, and then the relevant

standard sets out five processes to be able to recognize the revenue: (a) identify the

contract with the client, (b) identify the performance obligations or deliverables promised

in the agreement, (c) determine the contract consideration or agreement’s value, (d)

allocate consideration to the performance obligations, and (e) recognize revenue when the
 41
control occurs (Huefner, 2015). For services, control is transferred over time hence

revenue is recognized over time as well. Thus, companies have to implement the input

method or percentage of completion method, which is the most appropriate measure of

progress to recognize the revenue. Huefner (2015) pointed out that many of the fraud and

enforcement cases are associated with timing issue of revenue recognition typically

reporting revenue earlier than the appropriate time.

According to Mardini and Power (2015), IAS 18 is still existing and in their

recent study discussed the application of IAS 18 by the Jordanian industrial companies.

Mardini and Power posited that the objectives of their study are: (a) to examine the extent

of application of IAS 18, which is related to the revenue recognition in selected Jordanian

industrial firms listed on the Amman Stock Exchange (ASE), and (b) to examine the

impact of certain organization characteristics such as the size of the company,

profitability, leverage, liquidity, listed status and ownership of the application of IAS 18

among Jordanian industrial companies. Mardini and Power found that, on average, the

firms published information on almost 56% of the 15 items included in the index; only 13

firms achieved high disclosure scores. Mardini and Power stated that to be able to

achieve the objectives of this study an index comprising of 15 items were used to study

disclosures by 40 industrial companies listed on the ASE. The 15 items according to

Mardini and Power, are detailed as follows: (a) sales of goods, which is defined here as

the amount of revenue can be measured reliably, (b) the cost of goods sold, (c) matching

revenues and expenses, (d) sales of goods, which is defined here as goods produced by

the company for the purpose of sale and goods purchased for resales, (e) sale of goods,

which is defined here as it is recognized only when it is probable that the economic
 42
benefits connected with the transaction will flow to the company, (f) interests, (g)

dividends, (h) accounting policies, (i) disclosure of sales of goods, (j) Disclosure of

interests, (k) disclosure of dividends, (l) disclosures of royalties, (m) disclosures of

contingent assets and liabilities according to IAS 37, (n) disclosure of the amount of

Revenue resulting from exchanges of goods or services included in each significant

category of revenue, and (o) measurement of revenues. The results revealed by Mardini

and Power indicated that there is significant scope for adding further disclosures under

IAS 18 by Jordanian industrial companies listed on the ASE. Further, the results also

suggest that firm size is significantly and positively associated with the application of

IAS 18. The analysis also substantiates that liquidity as well as leverage are significantly

and negatively connected with the application of IAS 18, whereas profitability is not

significantly associated with the level of disclosures under IAS 18.

Financial Statement Material Weaknesses

Financial statements are significant to any user who wants to make an economic

decision. Therefore, management should ensure that the presentation of the company’s

financial statements does not include any material weakness that misleads their internal

or external users and to avoid any financial statements’ restatement. Chung and

McCracken (2014) discussed in their paper the restatement process, its interaction among

the auditors, CFOs, CEOs, audit committee and regulators and its impact on the

relationship between these parties.

Jahmani, Ansari, and Dowling (2014) identified new accounting standards,

accounting errors, and lack of management integrity as the primary reasons for the

restatement of financial statements. The management usually do restatement of the

 43
company’s financial statements for several reasons, to name a few, misapplication of the

implementation of the conversion from the General Accepted Accounting Standards

(GAAP) to the International Financial Reporting Standards (IFRS) and vice versa and

incompetence of the employees leading to accounting errors, and lack of management’s

integrity (Chung & McCracken, 2014). Moreover, Chung and McCracken found no

research conducted so far to describe the role of the various parties concerned in the

restatement process. Jahmani et al. found that a high percentage of companies that have

weakness in internal control have restated their financial statements. Chung and

McCracken (2014) found in their research that restatements indicate ineffective audit

effort or underestimated audit risk during the planning process in the years leading up to

the restatement. Materiality implies any misstatement that has an adverse effect on the

financial statements and its result may mislead the users of the financial statements to

take an economic decision (Chung & McCracken, 2014).

Additionally, prior studies rely inevitably on the number of meetings and duration

of the audit committees and how active those committees were involved in the internal

control problems that lead to a restatement. Chung and McCracken (2014) suggested an

approach that strives to look further to the role of involvement of each party in the

restatement process, the effect of the restatement process on the final resolution along

with the future relationship between these parties. However, Chung and McCracken

developed their questions based on the findings of prior studies in the restatement; these

studies indicate the restatement outcome, but Chung and McCracken did not discuss the

restatement process and the negotiations that resulted in final resolution.

 44
External auditors should not provide an unqualified opinion if material

weaknesses are detected by them and not rectified by the management. Brant, Steven, and

Christopher (2014) outlined that both US and international standards have proposed

changes to the auditors’ report and discussed the reports’ impact on any potential

investor. Brant et al. (2014) discussed in their paper the new adjustment proposed to the

standard audit report, which includes a requirement to insert a critical audit matter

(CAM) paragraph. Moreover, Brant et al. discussed the reaction of the users and

especially the non-professional investors when they read the auditor’s report with CAM

paragraph and its influence on the decision the investors will take to invest in the

intended investee. Brant et al. found that the investors are more sensitive to change their

decision when they receive a report that includes a critical audit matter other than the

investors who receive a standard audit report with no qualification. Donelson, Ege, and

McInnis (2015) found that the issuance of an adverse opinion by the auditor on the

internal control material weakness indicates a high possibility that managers are

committing unrevealed fraud. Hence, Donelson et al. revealed that the type of internal

control weakness is significant from prediction fraud standpoint. Brant et al. (2014) made

no mention of the positive issues in regards to the CAM and focused mainly on the

negative points of incorporating CAM in the audit report. Most of the investors are non-

professional; thus they may find difficulties to readily understand the auditor's opinion in

the audit report. Brant et al. should focus on the objective of the audit report, and

afterward, they could mitigate the subjectivity raised for integrating the CAM. The main

objective of the audit report is to provide an objective assessment of the fair presentation

of financial statements. Also, Hajiha and Bazaz (2016) used the external auditors’ reports
 45
to extract the internal control material weaknesses and afterward categorized them into

two groups of account and firm level.

Celenk (2013) conducted a survey study to evaluate the negative effect the

customers have on the members of auditors or professional while displaying their ethical

behaviors during the performance of the audit and preparing the tax return. Celenk

highlighted that recognizing the transactions in the books and issuing reliable and

accurate financial statements are significant not only to the taxpayers but also to other

users of the financial statements. This survey study is important since it reflects the

perspective of the professionals regarding ethical practices while they perform their audit

and preparing the tax return of the customers. Celenk found a contradiction in the

responses of the professionals between adhering to the code of ethics and objectivity

while performing their audit, and the wish of the customers to receive a financial

statement and tax return that meet their requirements. While Celenk pointed out the link

between the code of ethics and objectivity and work of the professionals, he did not

discuss the importance of the code of conduct and objectivity. While professionals may

encounter an ethical event with their customers, they should know how to overcome the

dilemma and perform their job ethically. Celenk outlined the importance of International

Standards on Auditing (IAS) or national auditing standards and International Financial

Reporting Standards (IFRS) or national standards and connect them to the practice of the

professionals.

Recognizing contracting revenues is based on accrual accounting because revenue

recognition is based on relevant management estimation and project budget. Maghariee,

Neghabi, and Abdi (2015) in their survey conducted an empirical investigation to study
 46
the impact of accrual accounting in the municipality of Amol, Iran. Maghariee et al.

examined whether or not the financial reporting prepared based on accrual accounting

compared with the cash accounting provide a better accounting method of for promoting

accountability. Maghariee et al. employed regression analysis to compare the

performance of accrual accounting versus cash basis concept. Maghariee et al. found that

applying accrual accounting could improve the accounting system in the municipality.

Maghariee et al. did not mention the effectiveness of applying the accrual basis in the

municipality accounting. The accrual accounting reflects the real financial position of the

public entities, and for most countries, the cash basis concept is no longer an option.

Maghariee et al. could mention the agility of the accounting researchers to improve the

current accounting system and replace it by the accrual accounting because it will

positively impact the accounting treatment of the public entities and also increase the

efficiency of work in the public entities’ accounting departments.

Internal Control

Effective internal control systems enable companies to ensure that their operations

are operating effectively and be able to get accurate and reliable financial outputs. Li

(2015) conducted a research study to investigate the relationship between the managerial

ability and internal control quality. Disclosing the internal control in the listed companies

in the United States is mandatory after the year 2012 (Li, 2015). Further, Li (2015) found

that a significant relationship exists between the managerial ability and internal control

quality. Li found that the efficiency of top executives’ positively relates with the internal

control quality. In other samples of the regression analysis, Li found that a significant

relationship does not exist between a managerial ability and internal control quality.
 47
Gooden-Sanderson (2014) found that managerial ability is positively associated with the

internal control quality, which confirms with Li findings. Gooden-Sanderson found that a

significant relationship does not exist between a managerial ability and internal control

quality, which supports Li’s findings.

The characteristics and behaviors of business leaders are a part of the control

environment. Lin et al. (2014) conducted an empirical study to investigate the influence

of CEOs characteristics on the internal control quality in the US. Lin et al. described the

characteristics of the CEOs regarding their age and tenure to be able to investigate their

effect on the disclosure of internal control’s material weakness. Lin et al. revealed that

the age and entrenchment of the CEOs are significantly associated with the disclosure of

internal control’s material weakness under Sarbanes-Oxley Section 404 (SOX 404). Lin

et al. also found that the younger the CEOs and the higher they own shares in the

companies will enable them to have entrenchments. Entrenchments lead to creating a

power to design an ineffective internal control mechanism, selecting auditing firms that

are not from the big 4 companies, and then will affect the strength of internal control

mechanism and reduce the disclosure of internal control material weakness (Lin et al.,

2014). Kehinde (2015) stressed that management should ensure that code of ethic and

objectivity is well established in the company to enhance the effectiveness of corporate

governance to mitigate the incidence of exogenous errors, fraud, and irregularities. Lin et

al. (2014) did not discuss the role of internal auditors in monitoring the effectiveness of

internal control and whether the entrenched managers or leaders in these companies had a

significant influence on the internal auditors' objectivity. While entrenchment and age
 48
drive the CEOs' behavior regarding the quality of internal control, the internal auditors

play a significant role to fill this weakness in the internal control process.

An internal auditor plays a vital role in the companies to ensure that the internal

control system is effective and report weaknesses to the top management. Roussy (2013)

discussed in the relevant paper the governance roles of internal auditors and their roles in

protecting the management and the company. Internal auditing plays a significant role in

protecting the company, and the management helps and guides the employees to apply

the internal policies and procedures effectively. Roussy revealed that internal auditing is

not a governance watchdog as defined by the regulatory bodies because there are several

studies that prove the act of internal auditor. The internal auditors operate as a member of

the management team and not as a member of the oversight board to monitor and

oversight employees. Further, Jahmani, Ansari, and Dowling (2014) highlighted that an

effective internal control assists companies in safeguarding their assets, generating

reliable financial reports, promoting efficient operation that affects the revenue, and

complying with the rules and regulations. In addition, Jahmani et al. outlined that the

findings are significant to the financial statements’ users such as regulators, and auditors

because an effective internal control gives confidence to the financial statement’s users

and close any loophole that affects its reliability. Jahmani et al. found that when the

company restructures its operation, establishes multi-segments, and a result of low or

negative return on assets, the probability of having an ineffective internal control is

significant. Jahmani et al. found that debt to equity ratio and fast revenue growth are not

significant variables to consider while evaluating the effectiveness of internal control.

Kehinde (2015) revealed that the scope of work of the internal auditors includes the
 49
detection and prevention of errors and irregularities, and report the same to the top

management. Further, Kehinde found that there is a positive relationship between the

daily job of the internal auditor and the effective working of the company.

The management is responsible for ensuring the effectiveness of the internal

control system in the company in which this set up will assist the internal auditor to

protect the company’s assets against any error or irregularities. Kehinde tested the

hypotheses with the 0.05% confidence, and accordingly Kehinde found that the entire

null hypotheses have been rejected, whereas the alternate hypotheses regarding: (a) the

responsibility of the internal auditor to detect and prevent error and irregularities, (b) the

effectiveness of internal control system in the company regarding the protection of assets

and management organization, (c) the relationship between the internal auditor functions

and the assets performance of the company, (d) and the establishment of effective and

adequate internal control system, which will assist the internal auditors to detect fraud

and irregularities were all accepted. The result obtained in this study revealed that there is

a strong linkage between the ineffective internal audit and financial statements fraud.

Therefore, Kehinde concluded a well-established internal control, which is the

responsibility of the management helps to mitigate any conducive to fraud. Further, the

management should set up an effective communication of both upward and downward

flow of information for effective working in the company’s system. Additionally,

Jahmani et al. stressed that the management should ensure that code of ethic and

objectivity is well established in the company to enhance the effectiveness of corporate

governance to mitigate the incidence of exogenous errors, fraud, and irregularities.

 50
Internal control is mandatory in the listed companies in the United States due to

the positive impact adequate internal control over the companies’ operations. Jahmani

and Dowling (2013) employed ANOVA and logistic regression techniques in the study to

examine a sample of large accelerated filers with internal control weaknesses to identify

the characteristics of these companies. Jahmani and Dowling selected the control group

with an effective internal control to match the same sample number from each industry in

the experimental group. Jahmani and Dowling examined the large accelerated filers

merely because the other categories were exempted from reporting on the effectiveness of

their internal control in their annual financial statements. The other categories are small

companies, accelerated filers, and non-accelerated filers. Although the non-accelerated

filers are obliged to report on the effectiveness of their internal control in their financial

statements, however, the authors regarded non-accelerated filers have a few resources

than large accelerated filers, and there is doubt regarding if they will be able to maintain

an effective internal control (Jahmani & Dowling, 2013). Jahmani and Dowling found

that large accelerated filers had a well-developed and established internal control over the

small companies. Kehinde (2015) revealed that the scope of work of the internal auditors

includes the detection and prevention of errors and irregularities, and report the same to

the top management. Further, Kehinde found that there is a good relationship between the

daily job of the internal auditor and the effective working of the company. Hajiha and

Bazaz (2016) argued that association of not reporting internal control weaknesses in the

company is higher than reporting earnings and management compensation with internal

control material weaknesses for the following reason: (a) managers can apply their full

discretion to manipulate the result when the internal control is weak, and (b) in the
 51
absence of ineffective internal control, the possibility of not detecting the occurrence of

accounting errors is considered high.

Employee treatment in the companies is crucial regarding the implementation of

internal control set by the management. Guo et al. (2015) conducted a quantitative study

to examine the effect of employee treatment policies on the accounting practices of the

companies along with the dimensions of the internal control processes and financial

statements activities. Further, the aim of Guo et al. study was to investigate the role of

employee treatment policies on the effectiveness of internal control about how to mitigate

it along with the financial statements restatements. Accordingly, Guo et al. found that

material weaknesses in internal control were mitigated when the management establish a

more employee-friendly policies vis a vis their counterparts with fewer employee-

friendly policies. Further, Guo et al. found that the appropriate worker-friendly policies

considerably mitigate the propensity for financial restatements, especially for those

driven by unintentional errors. Guo et al. results were consistent with the COSO internal

control integrated framework along with the human capital theory of corporate

governance. Guo et al. suggested that employee-friendly policies are capable of reducing

the failure of the employees in the internal control processes and crucial to the success of

the companies in the accounting practices. This implies that treating the employees with

good corporate governance, improving their knowledge and experience through regular

training and coaching, keep their moral up and motivated, will have a positive effect on

the internal control processes, which in turn mitigate the financial statements restatements

caused by intentional or unintentional accounting errors. Wang and Yu (2015) examined

the influence of internal control’s quality change on the listed corporations of the
 52
construction sector and its impact on the corporate value. Wang and Yu found that the

internal control of listed companies of the construction industry had been improved

continuously from 2008 and 2012. Further, considerable improvements in internal

control’s quality change have taken place after the year 2010. In addition, Wang and Yu

found that there was a significant correlation between internal control quality of

engineering projects with the companies’ sustainability and corporate value.

Relation of the internal control and five COSO components of internal control

integrated framework is significant to ensure the effectiveness of the components.

Länsiluoto, Jokipii, and Eklund (2016) examined the effectiveness of the internal control

and its relation to the five COSO components of internal control integrated framework.

The internal control effectiveness was measured according to the management

assessment and not to the internal control material weaknesses reports since not all the

companies apply the Sarbanes-Oxley Act, and then the study could be considered more

powerful for them (Länsiluoto et al., 2016). Länsiluoto et al. 2016 found that there are

interrelated, but not straightforward, relationships between internal control variables,

which are the five COSO components and three-dimensional types of internal control

effectiveness. Also, Länsiluoto et al. 2016 found that there was a link between some of

them and higher internal control effectiveness in practice. These findings have significant

implications for those accountable for improving or assessing internal control, such as

management, personnel, and internal and external auditors. Further, Länsiluoto et al.

2016 found that one component of effectiveness might be at a high level of effectiveness

such as efficiency and effectiveness of activities whereas another component might

exhibit a low level of effectiveness such as reliability and financial reporting. These
 53
results confirm previous studies done by other authors that internal control effectiveness

is a multi-dimensional concept than a one-dimensional concept.

Reporting internal control weaknesses by the companies is important because

disclosures do not mislead the users of the financial statements. Wilford (2016) examined

during an empirical analysis whether there is a difference between internal control

reporting regarding the material weaknesses among foreign and U.S. companies. Both the

material weakness samples and control samples included the US and non-US companies.

Wilford defined the non-US companies as headquarters located outside the US.

Afterward, Wilford examined the relation between internal control reporting regarding

the material weaknesses and the accounting standards employed by companies in the US

and foreign firms in their submitted SEC financial statements. Overall, the results

indicated that foreign firms are more likely to report internal control material weaknesses

than U.S. companies. Further, Wilford found that foreign companies, which submit

financial statements according to U.S. GAAP or according to their domestic standards

and then reconciled to U.S. GAAP were more likely to report internal control material

weaknesses. Moreover, Wilford examined whether the rule of law affected the reporting

of internal control material weaknesses due to specific political factors that could

influence some country. Wilford revealed that foreign companies, which are classified as

the strong rule of law countries are less likely to report internal control material

weaknesses, and foreign companies that are classified as the weak rule of law countries

are more likely to report internal control material weaknesses. Additionally, foreign

enterprises that use IFRS to submit their SEC financial statements are less likely to report

internal control material weaknesses in a strong rule of law countries, and there is no
 54
significant relation between IFRS companies and material weakness reporting in the

weak rule of law countries (Wilford, 2016). Lenard, Petruska, Alam, and Yu (2016)

conducted in their study empirical analyses techniques such as univariate and regression

analyses for the purpose of examining whether US companies that file internal control

weakness (ICW) disclosure together with their financial reports with the Securities and

Exchange Commission (SEC), as part of the financial annual reporting requirements of

Section 404 SOX, exhibit higher levels of real activities manipulation (RM). Lenard et al.

revealed according to the results of the study that companies with Internal Control

Weaknesses (ICWs) involved in real, beyond accrual-based, earnings manipulation.

Further, Lenard et al. found that companies with ICWs have lower unusual cash flows

from operations, lower abnormal discretionary expenses, and higher abnormal production

costs, compared to firms that have not ICWs. Lenard et al. found that the level of

discretionary accruals for companies with ICWs is not significantly different from

companies with no-ICWs. As a result, these findings provide support for the controversy

that the reporting of ICWs does not prevent real earnings manipulation activities from

occurring.

Accounting Information

Accounting information within the companies is important for the decisional

process, including contracting companies where costing departments have to collect and

elaborate information from various managers to be able to prepare an accurate project

budget. Silviu (2014) discussed the importance of accounting for the decisional process

in the company. Further, Silviu discussed the importance of accounting information with

regards to its reliability, relevance, comparability, and coherence regarding the financial
 55
statements’ users and their investment decision. Silviu pointed out that according to the

accounting information, management can realize a measurement system of economic

performance. Accordingly, Silviu found that accounting represents the core of the

informational system, and the accountants play a significant role in providing information

that is considered the foundation for processing and analysis of information. Also, Silviu

found the necessity of normalization, harmonization, convergence, and standardization at

a global level to reducing the differences between the accounting standards applied in

Romania and IFRS to encourage foreign investments.

Silviu (2014) conducted a qualitative method, by reviewing articles and books

from different authors to collect data. However, Silviu had not approached participants,

other than perceiving the theoretical perspective to be able to confirm and support the

findings and conclusions of these authors. Having said that, the participants who have

experience in accounting can provide significant information about the importance of

accounting information and its role in the decision-making process. Further, the

participants other than the authors could provide information about the effectiveness and

efficiency of accounting information in the accounting information system through

processing, to an analysis of the output reports. Any company cannot run its operation

without accounting information system because it enables management to generate

operational results, financial position, statement of income, detailed financial reports, and

the cash flow of the company. Therefore, interviewing participants who have experience

in the accounting field and handling managerial position would have provided effective

information that supports the authors’ findings.

 56
Yin (2014) discussed the importance of having a proper accounting system for the

useful economic decision of micro and small-scale entrepreneurs (MSSEs). Yin (2014)

conducted a mixed method research by interviewing and interrogating participants in the

market centers of Navrongo and Bolgatanga and the surroundings by preparing some

questions and their administration. One hundred and eighty respondents are used for this

study. Yin collected qualitative and quantitative data, which cover: (a) profile of the

respondents, (b) the manner of recording the accounting transactions, (c) mechanism

applied in the inventory cycle, the MSSE’s basis of determining the bottom line of his or

her operations, and (d) information used in making economic decision. Yin outlined that

there is no study of this kind conducted in the usefulness of accounting field to MSSEs in

Ghana. Therefore, during the research study, Yin found that 95% of the 180 respondents

have a good knowledge and understanding of accounting. Precisely, the accounting

information regarding the double entry system, which means for every debit entry, there

should be an equivalent amount of credit and vice versa. Although Yin found that all the

180 participants used some written records or, in other words, single entry system,

however, out of the 28% of the total population that maintained a complete set of

accounting records, 9% only maintained a computerized double-entry system of

recording accounting transactions. This process implies that although the interviewees

have a good knowledge of accounting, however, they maintained ineffective and

inefficient accounting system in their companies to improve the effectiveness and

reliability of their financial reports. Further, 71% of the total population responded that

they relied on the management accounting report for the usefulness of accounting

information (Yin, 2014). Yin (2014) revealed that 29% prepared and generated a
 57
complete set of financial statements to rely on the usefulness of accounting information.

Additionally, although the results revealed that the educational background and literacy

was necessary, however, it was not a sufficient factor for the use of accounting

information for the MSSEs (Yin, 2014). Yin outlined that there were evident in the

samples responded by the participants in which six of the 16 enterprises that represent 9%

of the total population and used the computer-based accounting systems are owned by

non-educated entrepreneurs.

Ball (2013) addressed the exaggerated amount of attention supplied in the

literature to accounting’s role in providing new accounting information for equity

investors, and to purportedly widespread earnings management. Ball outlined that the

financial statement might not provide a substantial amount of new information to the

equity investors due the time it takes to issue a financial statement. Further, Ball found

that accounting accruals consist of opportunities to manipulate. The relevant standards

oblige the management to prepare the financial statements on the fair value basis, which

is adjusted annually according to the current market value. Nevertheless, Ball discussed

the discretionary and non-discretionary accruals, which play a significant role in the

financial statements. Also, Ball outlined how the managers can manipulate the results by

recognizing discretionary earnings for their self-interest.

In addition to accounting information system, the effectiveness of corporate

governance plays a vital role regarding the disclosure of internal control information.

Agyei-Mensah (2016) collected data from 110 companies in Ghana for the year ending

2013. Afterward, Agyei-Mensah examined the financial statements of the selected

companies to be able to obtain the disclosure of internal control information index.

 58
Agyei-Mensah found that most of the companies selected for this examination had not

disclosed sufficient internal control information in their annual financial reports.

Therefore, Agyei-Mensah indicated that insufficient internal control information does not

help the stakeholders to assess the corporate governance. Further, the results revealed that

that board independence is a significant variable, which explains the disclosure of

internal control (Agyei-Mensah, 2016).

The independent directors help to improve the quality of internal control

disclosure and increase the transparency of information. The findings of this study

confirmed with the World Bank’s study regarding the weakness of disclosure of internal

control information in the annual reports of Ghanaian companies. The primary objective

of financial statements is to provide information that will be used to take an economic

decision (Chung & McCracken, 2014). Therefore, good corporate governance ensures

that comprehensive risk management occurs as a normal course of events, and there

should be a transparent disclosure for the stakeholders of the company regarding nature,

extent, and management of these risks. Neogy and Kumar (2014) conducted a survey

study to evaluate the efficiency of Accounting Information System (AIS) on the mobile

telecommunication sector. The use of computerized AIS bears significant time and cost

saving. The AIS helps the management to record and process various accounting

transactions, and then get the financial reports, which will be useful for their users to

make an economic decision. Neogy and Kumar found that existing of an effective

internal control system increase the efficiency of AIS through ensuring the safeguarding

of assets and getting accurate and reliable accounting information.

 59
In addition, Neogy and Kumar (2014) found that the existence of adequate

internal control system improved the efficiency of AIS through the prevention of fraud.

Neogy and Kumar highlighted that the separation of operation transactions from

accounting transactions reduces the risk of fraud. An effective internal control system

ensures the adherence to the policies and procedures set by the board of directors. In

addition, proper documentation increases the efficiency of AIS since it is essential for

providing reliable and relevant information, which helps the management to perform

business activities properly and make an appropriate economic decision according to the

financial statements. Elbardan, Ali, and Ghoneim (2015) proposed in their qualitative

method case study design a conceptual framework for analyzing the internal audit

function (IAF) adaptation for the introduction of enterprise resource planning (ERP)

systems in the corporate governance context. Elbardan et al. posited that the conceptual

framework is a tool to be used when exploring the changes in the IAF connected with

ERP systems implementation. Elbardan et al. highlighted that the purpose of this paper

was to provide a conceptual framework that helps to explore how the IAF responds to

both the introduction of the control logic of ERP systems, and corporate governance’s

institutional pressures. Moreover, the objective of the paper was to articulate the

concurrence between the external pressures of Corporate Governance and internal control

logic of ERP systems. Elbardan et al. articulated in their institutional study theory to form

a conceptual framework, which explains the mutual interplay between the macro external

corporate governance pressures, micro internal institutional logics inscribed in the ERP

systems and their impact on IAF practices and structure within companies. The authors

presented a review of the normative literature concerning the increase in the significance
 60
of corporate governance in the light of the worldwide economic crisis. They highlighted a

research gap related to the lack of studies focusing on the effect of ERP systems

implementation on the IAF practices. The paper is conceptual in nature, and accordingly,

the proposed framework was to be validated by employing a qualitative research

approach in future research. The conceptual framework proposed in this study would

offer the internal auditors some strategies for allowing adaptation to the various internal

and external pressures. Further, the paper provides a platform for the research community

to examine the influence of corporate governance and ERP systems implementation on

IAF adaptation.

Further, Ying (2016) conducted an empirical study by employing correlation and

regression analysis to verify the relationship between internal control information

disclosure, earnings management, and agency costs in the Chinese companies. Earnings

management is management authorities to maximize their self-interest in the company by

controlling and amending the accounting information and is measured by the amended

Jones model (Ying, 2016). Further, Ying measured internal control information

disclosure based on internal control information disclosure index separated between first

class indicators; reliability, correlation, integrity, and understandability; and second class

indicators, which refer to the relevant first class but in further details depending on the

indicator. Further, the rate of overhead expenses measured the agency cost. Ying found

that internal control information disclosure can affect earnings management through

agency cost. Moreover, Ying found that the improvement of internal control information

disclosure will effectively reduce agency cost, thus reducing earnings management.

According to Ying, implementing the basic norms of internal control effectively has an
 61
adequate impact in China. Hence, listed companies should improve internal control

information disclosure quality to strengthen the reliability of public information and

preserve the interests of investors.

Management accounting practices were initially based on simple cybernetic

controls where objectives and standards are set, inputs and outputs are compared with the

actual data and, as a consequence, the management takes appropriate corrective actions to

revise the set goals. Therefore, as the effect of the influence of environmental uncertainty

was recognized, companies were obliged to develop strategies that focused on product

and service innovations to provide a competitive advantage. Chenhall and Moers (2015)

aimed to show how the design of management control systems (MCS) has developed in

response to the demand for companies to address the challenges of operating in uncertain

settings by embracing innovation. Chenhall and Moers demonstrated how MCS have

evolved to more complex calculative practices, whereas MCS was conventionally

designed as control parameters based on simple closed systems, employing mainly a

financial-based logic. Chenhall and Moers outlined that this evolution has been a

response to the challenges of managing in uncertain conditions, where innovation has

become an imperative. Chenhall and Moers investigated how management accounting

has evolved from a conventional, cybernetic approach to control operating within a

restricted system with little attention to adaptive processes into MCS that embraces a

more complex, dynamic, open approach to management control system that has provided

a basis to facilitate innovation. Hence, technologies and organizational structures were

designed and developed in a way to help achieve the requirements for innovations in

effective ways. Therefore, it is in this setting that MCS developed to address the need for
 62
control systems that were sufficiently open to external factors to help identify possible

innovative products and services. Consequently, MCS could then evaluate the efficiency

and the effectiveness of which managerial processes and individual behavior could

deliver the innovations to market in cost effective ways.

International Financial Reporting Standards and Accounting Estimates

Globalization and international companies are moving forward to adopt IFRS

while preparing their financial statements to increase efficiency and avoid restatement.

Cameran, Campa, and Pettinicchio (2014) conducted a quantitative study using the

propensity score matching approach to be able to match between a control sample of non-

IFRS adopters and IFRS adopters’ sample. The purpose of this study was to evaluate the

impact of adopting IFRS on the non-listed companies regarding the abnormal accruals

and timely loss recognition comparing with a sample of companies reporting under

national general accepted accounting standards (GAAP).

Cameran et al. (2014) conducted their study in Italy since the national GAAP

applicable is not similar to IFRS other than the other Anglo-Saxon countries that have

fewer differences regarding the IFRS standards. Further, the Anglo-Saxon countries do

not give a choice to their non-listed companies to prepare their financial statements by

either IFRS or national GAAP, whereas, Italy gives this opportunity to its companies in

which the authors found in doing research in Italy gives more validity to the study.

Hence, Cameran et al. found in their empirical results that IFRS did not contribute to the

improvement of financial reporting quality among the sample non-listed companies

selected in Italy. The adoption of IFRS exhibited a higher level of abnormal accruals and

a decrease in a timely loss recognition of the revenue recognition. Moreover, Cameran et

 63
al. run different analyses for subsidiaries that are controlled by listed companies to

perceive the reason for switching to IFRS. Also, Cameran et al. found that these

subsidiaries switched to follow the headquarters' requirements or to simplify their

financial reporting. Thus, both empirical results of the non-listed companies comparing

with the national GAAP, and the subsidiaries of listed companies indicated signs of

deteriorating earnings reporting quality. Cameran et al. did not identify the activities of

sampled companies.

Adopting IFRS implies the companies should comply with the standards

introduced by IFRS and the impact of these standards on the accounting treatments.

Streaser, Sun, Zaldivar, and Zhang (2014) discussed the implication of the introduction of

IFRS 15, the new awaited global standard on the revenue recognition. Streaser et al.

applied the provisions of the new revenue standard to a hypothetical contract between a

client and a telecommunications company. Streaser et al. found that the new standard

accelerates revenue recognition of the bundled contract comparing with the current

standard revenue guidance. Streaser et al. outlined that the majority of the companies that

generate revenues will be affected by the application of the new standard and especially,

the sectors such as construction, media, and telecommunications. By adopting IFRS 15,

for all contracts with clients, revenue will be recognized when control of the promised

goods or services is transferred to the contractor, not when risks and rewards are

transferred to the contractor. Streaser et al. outlined that in the new standard, recognition

of revenue occurs when a performance obligation is satisfied by transferring the control

of promised goods or services to the client. The standard applies to all companies and

replaces most current industry-specific guidance. Further, Streaser et al. articulated that
 64
collection of necessary data to implement the new standard requires adequate internal

control systems.

Kumar (2015) conducted a case study analysis to explore the impact of voluntary

adoption of international financial reporting standards (IFRS) on the financial decision in

Wipro Ltd, which is one of the largest IT services companies in India. Kumar compared

the major financial parameters under IFRS and Indian General Accepted Accounting

Standards (GAAP) as reported by Wipro Ltd. The company reported its financial

statements under both IFRS and GAAP with a transition date of 01.04.2008. Kumar

compared the financial parameters, which are liquidity ratios, debt ratios, equity ratios,

and profitability ratios for four periods from 2010 to 2013 and found that a substantial

increase in liquidity ratios, equity ratios, and debt-equity ratios. The results identified no

significant increase in the profitability ratio except for the year 2013 due to the demerger

and discontinuation of operations accounting treatment between IFRS and GAAP for

some of the company’s subsidiaries (Kumar, 2015). However, Kumar cannot generalize

the findings of this case study to other companies because this case study covers one

company only. Therefore, the financial parameters of this company might generate

different results in other companies that work in the same industry but have different size,

and in companies that work in different industries. Further, the significant reasons that

caused the difference in the relevant ratios might be attributed to principle based IFRS

standard, which requires fair value accounting, the difference in accounting for leases,

financial position approach to deferred taxes, and timing of providing provision for the

proposed dividend.
 65
Management in contracting companies uses estimation project budget and

uncertainty to recognize revenue. Kapić and Bašić (2013) illustrated in their study the

importance of accounting policies and estimates to adapt and adopt to the accounting

policies in a form that reflect the environment in which they operate and the risks that are

related to their activities, as part of the overall system of internal controls. Further, Kapić

and Bašić found that an establishment of an effective internal control system will provide

possible detection of risks, and according to these risks, the management can design

adequate accounting policies, which are the basis of making accounting estimates. In

addition, Kapić and Bašić found that the consistency of application of accounting

procedures would ensure the reliability of financial information. Moreover, Kapić and

Bašić found that the implementation of five components introduced by COSO integrated

framework are not sufficient to provide reasonable assurance about the achievements of

its objectives, which are the effectiveness and efficiency of operation, the reliability of

financial reporting, and the compliance with applicable laws and regulations. Kapić and

Bašić stated that the absence of adequate monitoring, which one of the five components

negatively affect the effectiveness of accounting policies and estimates. Kapić and Bašić

gave attention to the accounting estimates and the risk that might affect the reliability of

financial statements in case the accounting policies were not designed properly according

to the business environment of the relevant company.

Accounting estimates are based on the management judgment according to the

latest available, reliable information due to the uncertainties inherent in the business

world. Kapić and Bašić (2013) concluded the revenue recognition of the contracting

companies is based on accounting estimates along with any foreseeable losses, which
 66
implies the use of judgment by the management in estimating the budget cost of the

project. Moreover, tests of critical accounting policies provide insight into the most

complex, subjective judgments of management regarding how it interprets instructions of

IAS 8, using subjective evaluations.

Maghariee, Neghabi, and Abdi (2015) studied the impact of accrual accounting in

the municipality of Amol, Iran. Maghariee et al. examined whether or not the financial

reporting prepared based on accrual accounting compared with the cash accounting

provide a better accounting method of for promoting accountability. Maghariee et al.

found that applying accrual accounting could improve the accounting system in the

municipality. Maghariee et al. did not mention the effectiveness of applying the accrual

basis in the municipality accounting. The accrual accounting reflects the real financial

position of the public entities, and for most countries, the cash basis concept is no longer

an option. Maghariee et al. should have mentioned the agility of the accounting

researchers to improve the current accounting system and replace it by the accrual

accounting since this will positively affect the accounting treatment of the public entities

and also increase the efficiency of work in the public entities’ accounting departments.

Tunçez (2015) discussed in the relevant article the difference between the completed

method and percentage and completion method to record the revenue regarding the

construction contracts. The purpose of this article was to examine the accounting practice

about the construction contracts within the frame of both methods along with the

difference between them. Tunçez found that using the percentage of completion method;

the result will be more accurate regarding the revenue recognition. Further, Tunçez found

that using the percentage of completion method; the financial statements will be more
 67
reliable and reflect the yearly profitability or loss of the company. The significant issue in

the accounting practice of the contracting and construction field is to know how to

recognize the revenues and allocate the expenses within the scope of contract in which

construction work is carried out. The measurement of revenue in the construction

contract affected various uncertainties depending on the consequences of the future

events. Hence, when the event is completed, and uncertainties are solved, then the

estimated revenues can be reviewed and adjusted accordingly.

Using the complete contract method of accounting, a project should be almost

completed to be able to recognize the relevant revenues and costs. Thus, this

measurement is not reliable to the financial statements’ users since they cannot control

the profitability of the company on a yearly basis and also the result does not reflect the

yearly profitability or loss accurately. The calculation used in the percent of completion

method is: divide the total cost incurred as of the end of each year by the relevant total

estimated budget (Tunçez, 2015). This percentage multiplied by the total contract value

along and total estimated cost is the yearly result. As indicated by Maghariee et al., this

method is reliable and applicable in the construction, contracting, and engineering work

because it is reliable and reflects the best way to get output and performance of the

project on a yearly basis instead of waiting until the end of completion of the project.

Contracting Field

Establishing an effective internal control system in the contracting field is

significant because it reflects the accuracy of financial reports. Jarkas and Haupt (2015)

conducted in their paper a structured questionnaire survey, which comprises 37 potential

risk factors distributed to a representative number of contractors. Also, Jarkas and Haupt
 68
highlighted the major contracting risk factors considered by general contractors running

their activities in Qatar through identifying, exploring, ranking the relative importance

factors and determining the prevalent allocation response trends. Further, Jarkas and

Haupt selected a total number of 126 contracting companies classified under the first,

second, and third categories were selected for the interviews. Jarkas and Haupt discussed

in details the risk factors caused by the clients, consultants, contractors, and exogenous

and affect the contracting revenue recognition. To name a few; errors and omissions in

design drawings, which might lead to further cost estimation managers did not consider

in the calculation of the project budget, contractors underestimate of construction cost,

and poor performance of subcontractors that might cause considerable penalties, which

affect the project budget (Jarkas & Haupt, 2015). Malaj and Shuli (2015) found that the

construction companies should give further attention to the improvement of management

regarding preparing the budget costs, planning, and designing of the projects because

those processes are fundamental and challenging activities in the management and

implementation of construction projects. Jarkas and Haupt discussed the risk factors

caused by the related group only, but they had not discussed their effect on the revenue

and the financial statements, which is a crucial part of the contracting project.

The contracting sector is considered major sources of economic growth. Malaj

and Shuli (2015) outlined that an effective contracting plan is a basis for developing the

budget and work planning. Further, Malaj and Shuli (2015) pointed out that the use of

international accounting standards in construction leads to improving the quality of

financial situation. The budget of the contracting project is very significant since the

revenue recognition is calculated on the state budget according to the International

 69
Accounting Standard 11, which discusses the construction contracts. Hence, estimation

managers should calculate the budget accurately to avoid any loss in the projects.

Numerous contracting companies declared their bankruptcy or wound up their activities

due to the accumulated and enforceable losses of the projects caused by inaccurate cost

estimation in the planning stage. Hence, the management should consider the costing

system of every project and consider the entire expenses the project might incur before

submitting tender or quotation to the customer. Sepasgozar, Razkenari, and Barati (2015)

conducted their study to investigate the essential causes of delay in the construction

projects. Sepasgozar et al. focused on technology attributes to understand the priority of

causes that affect the project duration and time. Accordingly, Sepasgozar et al. identified

top nine factors out of seventy-three as main causes of delay: (a) external factors, (b)

contractor attributes, (c) owner attributes (d) labor shortness, (e) material deficiency, (f)

design issues, (g) consultant attributes, (h) technology restriction, and (i) project

attributes. Further, the results revealed that technology restriction is one of the top nine

most significant factors out of seventy-three affecting construction projects' delay

(Sepasgozar et al., 2015). Most of the previous publications examined overall factors

affecting time, but a few publications concentrated on technology to measure the specific

effect of technology on a delay of the construction projects. Zhao et al. (2016) conducted

a survey study to develop a knowledge-based decision support system for enterprise risk

management (KBDSS-ERM) for Chinese construction firms (CCFs) for the purpose of

facilitating their ERM implementation. Zhao et al. outlined that the objectives of the

KBDSS-ERM are; to assess the ERM maturity in a CCF; to visualize the ERM maturity

assessment results; to provide action plans for improving the ERM implementation
 70
together with the maturity continuum, and to generate a printable ERM maturity

assessment report. Accordingly, Zhao et al. revealed that the results of the KBDSS-ERM

were consistent with the expert judgments. Further, Zhao et al. found that the KBDSS-

ERM had the accuracy ranging from 83.7 to 92.9 percent in evaluating the maturity

criteria and the overall ERM maturity of CCFs. Also, Zhao et al. found that the experts

recognized the significance of KBDSS-ERM as being a robust, adaptable and useful tool

for ERM implementation in CCFs. Using the KBDSS-ERM, the management of the

construction forms can understand its ERM implementation along with the relevant

strengths and weaknesses, and get the action plans recommended by the KBDSS-ERM.

Thus, with the information that the management would obtain from the KBDSS-ERM, it

can make better decisions associating to ERM. Also, while using the KBDSS-ERM, the

employees need to read the ERM best practices, which enables them to learn the ERM

fundamentals and build practical or innovative ideas connecting to ERM.

Contracting technology has a great potential to decrease project duration and

improve productivity (Sepasgozar et al., 2015). The priority of delay causes of the

contracting project is different in many countries due to environmental effects. Hence,

delays can lead to substantial negative effects such as lawsuits between clients and

contractors, loss of productivity and revenue, and contract termination (Sepasgozar et al.,

2015).

Transition

In Section 1 I included an overview of the impact of internal control in the

companies over the contracting revenue recognition. The section also included the

foundation to the study, background of the problem, problem statement, and the purpose
 71
statement. Also, another significant element in Section 1 was the nature of the study,

indicating my preference of the qualitative research method and the case study design for

the study. The research question element of the study was to enable the exploration of

what strategies do business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues. COSO

conceptual framework was the conceptual framework for the study, and the lens to view

the study. Further, I explained the assumptions, limitations, and delimitations, which

were the facts I assumed accurate without concrete evidence, weaknesses, and the bounds

of the study respectively. Another element in Section 1 for overview was the significance

of the study, which helped to explain the value of study to business, contribution to

business practice, and implications for social change. The literature review elements

contained topics relating to COSO framework, ERM, projects budget revenue

recognition, financial statements and material weaknesses, internal control, accounting

information, IFRS, and contracting field in which all will help the reader to understand

the subject and the importance of having these topics aligned together to be able to

develop and implement an effective internal control.

Section 2 contained research methodology and design of my study. The section

was a restatement of the purpose statement, the role of the researcher, the participants,

research method, research design, population sampling, and ethical research. Also,

Section 2 had data collection instruments, data collection technique, data organization

techniques, data analysis, and their reliability and validity. Section 3 concluded with a

presentation of the findings and recommendations.

 72
Section 2: The Project

In this study, I used open-ended questions, along with directed follow-up

questions, to explore strategies that business leaders responsible for financial reporting

use to develop and implement effective internal controls for recognizing contracting

revenues. In this section, I articulate the structure of the study as well as how this

structure helped me achieve the goal of the study. This section includes (a) the purpose

statement; (b) role of the researcher; (c) participants; (d) research method; (e) research

design; (f) population and sampling; (g) ethical research; (h) data collection instruments,

technique, organization, and analysis; and (i) reliability and validity.

counterpartsPurpose Statement

The purpose of this qualitative multiple case study was to explore strategies that

business leaders responsible for financial reporting use to develop and implement

effective internal controls for recognizing contracting revenues. The population for this

study included an accounting manager, finance managers, a chief internal controller, a

finance controller, an estimation manager, and cost control managers from three private

contracting companies in Qatar who developed and implemented appropriate internal

controls over revenue recognition. Implications for positive social change could come

from identifying internal controls that increase financial statement reliability, which

could lead to increased access to capital and debt financing and improved employment

opportunities in Qatar.

Role of the Researcher

Researchers play a significant role in developing research studies to determine the

meaning of phenomena. Kornhaber, de Jong, and McLean (2015) stated that the role of a
 73
qualitative researcher is to collect, analyze, organize, interpret, and understand data to be

able to determine the meaning of a phenomenon. Dasgupta (2015) described the use of a

qualitative case study design to explore information about a group of people in a

company rather than theoretical business issues. Leedy and Ormrod (2013) pointed out

that a case study design involves the participation of the researcher as the data collection

instrument. Further, Ho (2012) highlighted that qualitative researchers interpret data

through their personal lens by being the primary instruments for data collection. I studied

the phenomenon from the perspective of participants and not from the viewpoint of my

experience in the auditing and accounting field. As the primary researcher, I formulated

ideas proposed by the participants without prejudice. My role as the researcher was the

same as my role as a scholarly practitioner who collected, organized, and interpreted data

to be able to report on the results and come up with a conclusion. My role in the research

study included conducting semistructured interviews with open-ended questions for the

participants for the purpose of exploring strategies that business leaders responsible for

financial reporting use to develop and implement effective internal controls for

recognizing contracting revenues.

At the time of the study, I was a CFO for a large organization; a year before, I had

established my own audit firm. Since 2005, I had obtained experience as an external

auditor and tax consultant. My professional expertise and work related to the auditing and

accounting field as well as tax consulting in Lebanon and Qatar. The participants for the

study were business leaders responsible for financial reporting from three private

contracting companies in Qatar. I ensured that throughout the data collection process, my

professional ideas did not have any influence on the answers the participants provided.
 74
White and Drew (2011) emphasized that research participants should have the freedom to

respond to questions without any restraint. I did not use any company associated with my

current or previous employment, and I carried out transcript review (i.e., enabled

participants to review the transcripts) to mitigate bias. I relied only on information

gathered through the data collection process. Conducting interviews helps a researcher to

get the story behind participants’ experiences (Yin, 2014). Through interviews, a

researcher can gather in-depth information on an evolving topic (Yin, 2014). Interviews

are a useful data collection tool to gain in-depth understanding in relation to a research

question from the perspective of participants.

I ensured that the participants understood the risks of participation, and I worked

to reduce those risks and increase the benefits of participation by following the guiding

principles of the Belmont report. The Belmont report frames an ethical protocol for

research studies involving human subjects (U.S. Department of Health and Human

Services, 1979). Ethical principles in the report include (a) respect to persons, (b)

beneficence, and (c) justice (Adams & Miles, 2013). Further, the Belmont report

identifies boundaries between behavioral research and routine practices for research. The

Belmont report also indicates the requirement for risk assessment of human research

subjects and informed consent.

I provided participants an informed consent form, which described their rights,

the protections I built into the study, and the study’s voluntary nature. I maintained

ethical principles by assigning private codes to participant data, protecting participants’

identities, respecting all study participants, and enabling the participants' autonomy. I

respected the participants' opinions without obstruction. Snelgrove (2014) reemphasized

 75
that researchers should build trust with participants, which I sought to do in each

interview. I ensured that no harm came to the participants and did not take advantage of

their positions. As a novice researcher, I could not ignore the fear of being biased while

preparing my doctoral study, especially during the process of selecting interview

participants, collecting and analyzing data, and finally, coming up with findings and

conclusions.

I mitigated against bias in relation to participants' responses by applying member

checking during the data collection process. I gave the participants opportunities to

review my interpretations of their statements. Hammersley (2013) stated that researchers

should assure participants’ independence when providing information. I ensured that

participants were able to express their opinions throughout the interview process by not

asking leading questions. Further, I respected their contributions while preserving

transparency in the findings.

Adedokun, Ogunsemi, Aje, Awodele, and Dairo (2013) pointed out that

interviewing participants is the primary collection tool for qualitative researchers. I

conducted the interviews in places chosen by the participants, and I designed

semistructured interviews with open-ended questions. Open-ended questions are effective

for collecting information from participants (Andersen, Christensen, Kehlet, & Bidstup,

2015). The interview questions (see Appendix D) emerged from my research question

and the line of inquiry I established for the study. Frich, Røthing, and Berge (2014)

marked the significance of an interview protocol to ensure that researchers cover the

research question and topics consistently. An interview protocol enables researchers to

reduce deviation from the objectives of the study and maintain consistency from one
 76
interview to another (Baskarada, 2014; Wang, Xiang, & Fesenmaier, 2014). Researchers

should also provide satisfactory time for participants to answer questions (Malone,

Nicholl, & Tracey, 2014; Yin, 2014). Hence, my objective was to follow an interview

protocol (see Appendix A) to maintain consistency in data collection, enhance efficiency,

and ensure an organized interview structure.

Participants

The goal of qualitative researchers is to explore the depth and complexity inherent

in phenomena; qualitative researchers employ a subjective approach to describe

participants’ life experiences and to provide them meaning (Yin, 2014). Using a case

study design allows a researcher to explore a business-related bounded system involving

a group of people who have experience in a field (Dasgupta, 2015). Yin (2014)

highlighted that a case study is limited in scope to a particular issue at a specific site.

Sowman, Sunde, Raemaekers, and Schultz (2014) stated that it is important that

participants have experienced the researched phenomenon. Hence, I restricted my data

collection to three private contracting companies in Qatar. The population for this study

included business leaders responsible for financial reporting, such as an accounting

manager, finance managers, a chief internal controller, a finance controller, an estimation

manager, and cost control managers, who worked in private contracting companies in

Qatar and had experience and knowledge relevant to the topic.

The eligibility criteria specified that participants needed to be personnel with

direct involvement in financial statements, project budgets, and internal audit reports at

three private contracting companies in Qatar. Yin (2014) indicated that qualitative

researchers should establish participant eligibility for effective data collection. Using
 77
eligibility criteria helps researchers to select participants who have experience in the

appropriate field and can provide useful and relevant data (Latiffi, Brahim, & Fathi,

2016). As identified by Sowman et al. (2014), researchers should ensure that potential

participants are knowledgeable and have experience relevant to the research topic. The

eligibility criteria for the selection of participants in this study included the following: (a)

current employees in high management positions such as accounting managers, project

managers, estimation managers, and cost control managers; (b) more than 5 years of

professional and industry experience; (c) willingness to participate in an audio-recorded

interview; and (d) experience with developing and implementeing internal control

strategies concerning revenue recognition.

Upon receiving Walden University and Institutional Review Board (IRB)

approval (Walden IRB # 11-16-17-0553599), I visited each targeted company to discuss

with a company representative the purpose of the research study, criteria for participation,

participant confidentiality, and the informed consent process. Researchers can effectively

identify participants through gatekeepers (Gülmez, Sağtaş, & Kahyaoğlu, 2016).

Gatekeepers make decisions about gaining access to participants and related

organizational data (Whicher, Miller, Dunham, & Joffe, 2015). Thus, prior to any data

collection, I requested that a representative of each company (see Appendix B) sign a

letter of cooperation. Each company representative provided contact information for

participants meeting the criteria for participation. To ensure comfortable interaction with

potential participants, I sent, via email, each potential participant an invitation to

participate (see Appendix C). The invitation provided a brief overview of the purpose of

my study and criteria for participation. Further, I met with all potential participants and
 78
encouraged them to ask questions about the evolving topic and research study before

agreeing to participate.

Doody and Noonan (2013) claimed that establishing comfortable interaction and

communication with participants promotes detailed and accurate responses to questions.

Confidentiality and anonymity maintenance is a method advocated by Seidman (2013) as

a means of establishing trust. I requested that participants sign an informed consent form.

In the form, I explained the purpose and meaning of the study to the participants, along

with other details such as the protection of the participants’ information, ethical

considerations relevant to the study, risks associated with the research, and my contact

information. The ethical guidelines included the confidentiality of data collected,

anonymity, and data storage. Furthermore, in the informed consent form, I reminded

participants of their right to discontinue their participation at any time during the

proceedings.

Following the guidance of Rowley (2012), I conducted interviews with

participants face to face, and with each participant’s consent, I recorded the interviews

for accuracy. This setup allowed me the flexibility of follow-up questions for further

exploration and helped to accommodate the interviewees. Mohsin and Alhabshi (2015)

outlined that meeting with participants face to face before interview processes occur

helps researchers and participants get to know each other and enables researchers to form

meaningful working relationships with participants. Furthermore, I took notes during the

interviews about any observations I identified during the interviews. O’Reilly and Parker

(2012) posited that saturation occurs when participants offer no new ideas or new
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patterns. Interviews continued until I reached data saturation, interviewing all participants

cyclically.

Research Method and Design

Research Method

I employed a qualitative research method because my objective was to explore

strategies that business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues. Makrakis and

Kostoulas-Makrakis (2016) indicated that to be able to generate an understanding of a

phenomenon, researchers have to choose from three different types of research methods:

(a) qualitative, (b) quantitative, and (c) mixed method. Nyaribo (2013) pointed out that

the qualitative research method is flexible because it gives the researcher an opportunity

to amend and improve an interview as it progresses. Likewise, Blum (2013) noted that

the qualitative method enables researchers to incorporate unexpected findings that assist

in understanding the research problem.

A qualitative research method includes four elements, according to Holt and

Goulding (2014), to understand a phenomenon: (a) interview, (b) data analysis, (c)

quality check analysis, and (d) synthesis of the literature. Venkatesh et al. (2013) outlined

that the focus of qualitative research is identifying and exploring experiences of

participants. Further, qualitative research methodology employs unstructured or

semistructured interviews to elicit conversation about the participants’ lived experiences.

The goal of qualitative researchers is to explore the depth and complexity inherent in

phenomena; qualitative researchers employ a subjective approach to describe life

experiences and provide them meaning (Yin, 2014). Quantitative researchers analyze
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numerical data by employing statistical procedures and make deductive conclusions

about the relationships and differences among variables (Venkatesh et al., 2013).

According to Guta (2013), quantitative researchers use hypotheses, statistics, and

numbers. Petty, Thomson, and Stew (2012) posited that researchers employ numerical

data in quantitative methods to explain phenomena. Guta (2013) pointed out that a

quantitative research method is a deductive style of research with hypotheses for data

collection, whereas a qualitative research method is an inductive style of research.

Daigneault (2014) highlighted that stakeholders’ participation is absent in the findings of

a quantitative research method.

Using the mixed method requires the researcher to be an expert in quantitative

and qualitative methods (Bernard, 2013). Parker (2014) stated that combining

quantitative and qualitative methods in a single research study enhances and validates

research findings. The combination of quantitative and qualitative methods challenges the

underlying assumptions of the two paradigms. I did not choose a mixed method approach

due to the time constraints for my study. I did not plan to use quantitative data; thus, I

rejected both quantitative and mixed methods. My research objective was to understand

and not to measure a phenomenon; thus, I adopted the qualitative method. The qualitative

research method was suitable for my research to explore strategies that business leaders

responsible for financial reporting use to develop and implement effective internal

controls for recognizing contracting revenues.

Research Design

Qualitative researchers use various research designs, including ethnographic,

phenomenological, and case study. Onwuegbuzie and Byers (2014) identified numerous
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qualitative designs, of which I considered ethnography, phenomenology, and case study.

A phenomenological researcher seeks to gain the meaning of the lived experiences of

study participants about a concept or phenomenon (Bowden & Galindo-Gonzalez, 2015).

The purpose of this study was not to explore the lived experiences of participants. Thus, I

rejected phenomenology as a research design. Ethnographic researchers study cultures to

obtain an understanding of group’s cultural experiences (Mutchler et al., 2013). The

ethnographic researcher employs a population that may include an entire culture with a

shared reality (Campbell-Reed & Scharen, 2013). Ethnographic researchers are interested

in the culture and interact with the members of the cultural society during the research

project (Campbell-Reed & Scharen, 2013). Part of risk management relates to developing

a culture of ethics (Wójcik. 2013). Thus, an exploration of culture may create value when

exploring internal controls within an organization. The purpose of this study was to

explore a business problem from the perspective of a bounded system, not the culture of a

group. Thus, I rejected ethnography as a research design.

The purpose of a case study design is to explore a bounded system or a case over

time through detailed, in-depth data collection comprising multiple sources of

information in rich context. Yin (2014) stated that researchers who use qualitative case

study design gain better comprehension of a bounded system through interviews,

observations, and artifacts. Yin (2014) described the two designs that case study

researchers can conduct, single case study and multiple case study. The two case study

designs have holistic and embedded variants. According to Yin (2014), a researcher’s

choice between the case designs with their variants depends on the specific phenomenon

and the research question. Ketokivi and Choi (2014) noted that multiple case study allows
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cross-case analysis through case comparisons for measurable characteristics. Although

multiple case studies are more expensive and time consuming than single case studies

(Yin, 2014), I selected this approach to add further value to the study. A researcher using

a case study design explores both what and how or why questions in relation to a process

or phenomenon working within a bounded system (Yin, 2014). Using a case study design

enables a researcher to explore a business-related bounded system involving a group of

people (Dasgupta, 2015). Further, Tsang (2014) outlined that case study researchers

collect data from the natural set up of events. De Massis and Kotlar (2014) posited that

researchers employ case study design to achieve in-depth analyses of phenomena in real-

life context. My goal was to explore a business-related bounded system; thus, I employed

a qualitative case study design to address the purpose of my study.

Qualitative researchers ensure the achievement of data saturation before making a

decision to end data collection processes. O’Reilly and Parker (2012) stated data

saturation occurs when the data are repetitive, no new information is obtainable through

data collection, and fresh data does not lead to additional findings. Hanson, Balmer, and

Giardino (2011) stated that making a decision is possible by the researchers until themes

repeat. Trotter (2012) observed data saturation is interviewing to redundancy. To reach

data saturation, I continued to interview participants and collected supporting documents

until no new data or themes emerge, and I was confident that data saturation was reached.

Population and Sampling

A population is a group of people who provide the researcher with significant

information regarding the purpose of the study. The population for the study was from

three private contracting companies in Qatar. Ritchie, Lewis, Nicholls, and Ormsto
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(2013) posited that a population is a group contributing valuable information to research

in which this information affects the population through a coordinated method. I selected

three participants from each company for this qualitative research case study design to

explore strategies business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues. Yin (2013)

posited that researchers recommend various sample sizes for case studies, but there is no

set sample size for qualitative research; instead, the focus is on gathering sufficient data

to meet research objectives.

Sampling allows for the selection of a small unit of experts to represent the

perspective of the total population on a specific subject. Strnad (2013) pointed out the use

of sampling is cost and time-consuming. The sampling technique for this study was

purposive. I used purposive non-probabilistic sampling because this process enabled me

to ensure that the sample participants are qualified and have knowledge about the topic.

Purposive sampling is a judgmental sampling technique employed to select participants

who have experience and sufficient knowledge to be able to provide researchers

significant information regarding a phenomenon of interest (Palinkas et al., 2015). Daniel

(2012) posited probabilistic samples require random selection. IFRS (2015a) identified

the project budget as a critical element in the project cost estimation, which affects the

company's profitability. The sample population for this study was three private

contracting companies in Qatar. Dissimilar to quantitative research, O’Reilly and Parker

(2012) outlined that the purpose of selecting participants in qualitative studies does not

aim to collect a count of opinions or people or other quantifiable data. O’Reilly and
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Parker (2012) stated qualitative researchers concentrate on the range of participants'

opinions and experiences.

Interviews continued until the study reached saturation. O’Reilly and Parker

(2012) posited saturation occurs when the participants offer no new ideas or emergent

patterns. Also, O’Reilly and Parker (2012) stated data saturation occurs when the data are

repetitive, no new information is obtainable through data collection, and fresh data does

not lead to additional findings. Similar to Chung at al. (2014) I conducted in-depth

interviews and review additional data. In-depth interviews with the relevant business

leaders, who are responsible for financial reporting can provide rich data. The interviews

contributed a holistic view of the target companies.

Doody and Noonan (2013) claimed that establishing a comfortable interaction and

communication with the participants will promote detailed and accurate responses to

questions. Collecting data from inexperienced participants, who do not possess

knowledge about the relevant topic, will affect the quality of the information obtained

(Latiffi et al., 2016). Using a participant criterion helped me eliminate participants who

do not have an appropriate level of experience about implementing internal control

strategies.

Ethical Research

After receiving Walden University IRB approval and a signed letter of

cooperation (see Appendix B), I discussed the informed consent process with each

potential participant along with the purpose of the research and criteria for participation.

Participants who agreed to take part in this research received and signed the informed

consent form. I asked participants how they preferred to receive the informed consent
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form (i.e., postal delivery, e-mail, or hand delivery). Barazzetti, Hurst, and Mauron

(2016) outlined how the researcher shows respect, maintain commitment, and confirm

there was no stress or harm to participants. Researchers must abide by the rules of

research for human subjects presented by the Belmont Report (U.S. Department of Health

and Human Services, 1979).

Informing the participants before and during the interview process of their

inherent rights to withdraw from the study gives further encouragement to the

participants to take part in the study. Cox and Mcdonald (2013) recommended that

participants sign the informed consent form before interviews. Yin (2014) stated

researchers have to obtain the informed consent form from each participant before setting

an interview. I encouraged potential participants to ask questions about the research study

and process before consenting to participate. Chung at al. (2014) outlined that researchers

should have comprehensive knowledge about the topic to be able to encourage

participants to enhance interaction with the researcher and collect rich data. Once a

participant agreed to participate in the study, the individual signed the informed consent

form. Participants who wished to withdraw from the study after they signed the informed

consent form were required to notify me of such desire.

Incentives come in different forms such as shopping cards, gifts, substantial

invitation, and cash. Chen, Lei, Li, Huang, and Mu (2014) pointed out incentives play a

major role in the willingness of study participants because of the increasing demand of

research protocols. Chen et al. (2014) stated due to the financial constraints of the

researcher and ethical concerns do not offer any form of incentives. I did not provide an

incentive to participants, hence their participation is voluntary at all times.

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Protecting participants' identities is significant to the research protocol; hence, I

assigned a code to each participant. Yin (2014) highlighted researchers’ accountability

regarding the confidentiality of the participants' identities. It is significant to build trust in

the minds of the participants by respecting and protecting their rights and enjoying their

trusts. I placed all correspondence and interview information in password-encrypted files

and saved on a flash drive and Dropbox. Before destructing the files, I securely stored the

data for a 5-year period. Storing data enables later access and usage to the information by

the researchers (Shao, Bian, & Zhang, 2013).

Data Collection Instruments

As a researcher, I was the primary instrument used in the data collection process.

Seidman (2013) identified the researcher as the primary data collection instrument. Using

data collection in qualitative research, a researcher can gather data through direct

interactions with an individual or interaction in a group setting (Houghton, Casey, Shaw,

& Murphy, 2013). As suggested by Cridland, Jones, Caputi, and Magee (2015),

semistructured interviews were the interface for data collection. Semistructured

interviews enable flexibility of follow-up questions between the researcher and

interviewees for further investigating and help to accommodate the interviewees

(Onwuegbuizi & Hwang, 2014). Further, semistructured interviews enable the researcher

to use open-ended questions, with the benefit of asking follow-up questions to gather

further explanation and additional responses that add value to the research. I

supplemented interview data with multiple collection techniques including casual

observation, note taking, and a review of documentary evidence to substantiate the

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findings from my interviews. Documentary evidence included financial statements,

project budgets, and internal audit reports.

My objective during data collection was to present reliable and accurate findings,

maintain the participants' confidentiality, and remain ethical and objective during the

interview process. Additionally, I practiced the desired skills of the researcher outlined by

Cronin (2014), which included: (a) a researcher should be able to ask good questions and

interpret the answers, (b) a researcher should be a good listener and not be trapped by his

or her own ideologies or preconceptions, (c) a researcher should be adaptive and flexible,

so that researchers can perceive a newly encountered situation as an opportunity, not a

threat, and (d) a researcher should not be biased by preconceived perceptions, including

those derived from theory. Hence, a person should be sensitive and responsive to

contradictory evidence.

Researchers must take the necessary steps to mitigate research bias; hence, I

diminished my personal views and recognized the existence of bias. Similar to Yin

(2014), a role of the researcher is to plan to mitigate bias by maintaining a high ethical

standard through honesty, professional competence, reading articles related to the study,

and seeking peer review. Researchers also focus on self-understanding along with the

impact of their expectations and biases on their study (Berger, 2015). The goal was to

hear and interpret the experiences and reflections from the participants about the

phenomena. I remained consistent to ensure reliability by identifying the procedures,

reviewing the informed consent form with the participants, and following the interview

question guide.
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Member checking is a technique used to assure research validity (Harper & Cole,

2012). To conduct member checking, I wrote my interpretation of the data and presented

my analysis to the interviewees to verify the accuracy of their meanings. The use of

member checking increased the accuracy of interview data. Member checking involves

presenting interpretations of the interviews to participants to receive feedback and reduce

potential misinterpretation (Harper & Cole, 2012). Similar to Marshall and Rossman

(2016), each participant had the opportunity to review my interpretation of the interview

data to ensure no data were taken out of context and all interpretations were accurate.

Data Collection Technique

I conducted Skype or face-to-face semistructured interviews with open-ended

questions. I used the interview protocol (see Appendix A) and informed consent form as

guides to adhere to the procedures. An interview protocol enables researchers to reduce

deviation from the objectives of the study and maintain consistency from one interview to

another (Baskarada, 2014; Wang, Xiang, & Fesenmaier, 2014). Yin (2014) identified six

sources of data appropriate for case studies including documentation, archival records,

interviews, direct observations, participant observation, and physical artifacts. From the

perspective of Yin, any of the six sources of the data collection method is appropriate for

a case study design. Battistella (2014) pointed out using more than one source to collect

data lead to diversification of data, mitigating biases, and increased information basis. I

collected data from the interviews and company documents.

I targeted three private contracting companies where business leaders responsible

for financial reporting have solved the business problem identified in my study. Before

receiving IRB approval, I contacted a company representative from each company via
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telephone or e-mail to introduce myself, review the background of my doctoral study,

address any questions, and request that each sign a letter of cooperation. Afterward, I

asked potential participants within these three private contracting companies if they

would like to participate in a study. If a business leader agreed to participate and signed

the informed consent form, I set up an interview in their office, or another comfortable

location. Scheibe, Reichelt, Ballman, and Kirch (2015) pointed out a location familiar to

the participant will promote a comfortable interviewing environment. After setting up the

interview, I raised the interview questions including follow-up probing questions to get

more in-depth information. Further, I scheduled follow-up member checking interviews,

and share a copy of my synthesis of each question.

Semistructured interviews are opportunities ask targeted and insightful questions,

which provide a maximum degree of communication and interaction between the

researcher and participant. Figgins, Smith, Sellars, Greenlees, and Knight (2016) stated

semistructured interviews are insightful and help establish confidentiality with the

participants during the interview process. The interviewers took advantage of the

semistructured interviews to clarify responses from the participants. De Massis and

Kotlar (2014) stated that interviews help to make a study insightful and meaningful to

collect efficient and rich data. Cardamone, Eboli, and Mazzulla (2014) highlighted that

the advantage of face-to-face interviews is to enrich a study by enabling freedom of

expression between the researcher and participant. Face-to-face interviews are connected

with elaborating quality data (Cardamone et al., 2014). Another benefit of face-to-face

interviews according to Irvine, Drew, and Sainsbury (2013) is that the researcher can

observe behaviors and nonverbal signals. There are disadvantages with face-to-face
 90
interviews. Potential disadvantages, as stated by Szolnoki and Hoffman (2013), include

interviewer bias, participant time constraints, and geographic limitations. Yin (2014) also

identified the potential lack of control over the interviews as a disadvantage to face-to-

face interviews. However, for the purpose of this case study, the advantages of face-to-

face interviews outweighed the disadvantages.

Participants benefit from member checking. Harper and Cole (2012) highlighted

that participants receive a therapeutic benefit through member checking because they are

able to validate their contribution. Member checking enables participants to make

corrections to perceived errors in the data collection process because through member

checking participants verify the interpretation of the interview data (Brandburg, Symes,

Mastel‐Smith, Hersch, & Walsh, 2015). The process for assessment of reliability and

validity in qualitative research starts with member checking or transcript review.

Data Organization Technique

Data organization is a significant part of a research study. Data organization is a

substantial part of the research study because through proper data organization,

researchers can store, access, evaluate, and communicate research findings effectively

and efficiently (Korhonen, 2014). Research workers do suffer from disorganized data

especially in survey-based research studies (Karanja, Zaveri, & Ahmed, 2013). Hence, it

is imperative to organize data appropriately to avoid missing data of the essential

elements of the research studies and also to achieve effective data analysis (De Waal,

Goedegebuure, & Tan Akaraborworn, 2014). The process of data organization enables

researchers to identify emergent patterns from the data (Yin, 2014). Therefore, to be able

to achieve an effective and efficient data organization, I intended to build up a database

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using an Excel spreadsheet to keep a record of interview dates, the name of participants,

and data derived from the participants during the interview process. Further, to avoid

revealing the identity of the participants, I organized data by coding all participants’

information.

Creating a filing system is significant in a research study to be able to store the

data and track information obtained from the participants. I created a system to file the

raw data using a password-protected USB device and Dropbox, which is cloud storage.

Researchers should use cloud applications to store data and be able to track participants

(Hashem et al., 2015). Also, Hashem et al. emphasized using cloud storage application

avoid unauthorized access. I will store hard copies of the documents in a fireproof safe in

my personal residence including the USB drive for at least 5 years and I will have sole

access to the stored data. Banks (2013) pointed out storing participants’ information for at

least 5 years helps to protect confidentiality. I labeled participants as Participant 1,

Participant 2, and so on. Morse et al. (2015) emphasized protecting participant

information is a core tenet of research ethics. Hence, to protect the participants’

information after the stipulated period of storing the data, I will destroy both electronic

and hard copies after 5 years to avoid privacy violation and data leak.

Data Analysis

The purpose of qualitative data analysis was to explore the meaning of the

content. Meanings in qualitative research derive from words spoken and textual and

images, not numbers (Yin, 2014). Thus, this indicates that the quality of qualitative

research depends on the interaction between data gathering and data analysis to enable

exploration, clarification, and interpretation of meanings (Yin, 2014). Guo and Guo
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(2016) stated qualitative data analysis involves studying the content of information to

identify, classify, and transforming data into theme process. Data analysis consists of

preparing, organizing, and reporting (Elo et al., 2014). To analyze data, I employed

triangulation to enhance accuracy. Triangulation during data analysis enhances the

credibility and accuracy of the interpretation (Van Dijk, Vervoort, Van Wijk, Kalkman,

& Schuurmans, 2015). Joslin and Müller (2016) described triangulation as identifying

alternative perspectives to gain richer and holistic understanding of a phenomenon. Carter

et al. (2014) articulated employing triangulation as the use of the many sources that

enable the researchers to enhance their understanding of a study. Cronin (2014) pointed

out triangulation decreases and negates the deficiencies of a single data collection

strategy, thus increasing the scope for interpreting the findings. I employed multiple data

collection strategies including casual observation, note taking, and a review of

documentary evidence to substantiate the findings from my interviews. Documentary

evidence included financial statements, project budgets, and internal audit reports.

A logical and sequential data analysis process requires researchers to examine

data for the purpose of enhancing valid interpretation (Yin, 2014). I applied the three

phases of data analysis process identified by Elo et al. (2014). The phases included: (a)

preparation, which includes the collection of data, sampling strategy, and selecting the

unit of analysis (b) data organization, which includes categorization and abstraction,

interpretation, and responsiveness, and (c) reporting. To collect data, I engaged

participants in recorded semistructured interviews and triangulated interview data with a

review of documentary evidence including financial statements, project budgets, and

internal audit reports. As recommended by Cridland et al. (2015), I transcribed the

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recorded interviews to reflect on participants’ responses to obtain relevant data and to

ensure data are not lost. Researchers use multiple data sources to increase the confidence

and trustworthiness in the findings (Elo et al., 2014). In addition, Elo et al. (2014)

described trustworthiness for the main qualitative content analysis as phases from data

preparation to reporting of the results. To retrieve data from the companies’ documents, I

(a) narrowed my search to information related to strategies for preparing project budget

and relevant internal control, (b) pursued participants’ guidance on where to find the

information I needed, and (c) took notes and requested participants to make copies of

relevant documents that supported my findings as a researcher. Further, after collecting

and extracting relevant information from the companies’ documents, I incorporated

collected information along with the transcribed interview data. The trustworthiness of

data collection can be verified by providing accurate details of the sampling method in

which purposive sampling is convenient for qualitative studies where the researcher is

interested in informants who have the best knowledge concerning the research topic and

participants’ descriptions (Elo et al., 2014). Next, I classified narrative segments into

topical themes for effective data analysis, and concluded by interpreting the findings to

ensure the findings are accurate.

Computer-aided qualitative data analysis software along with the Microsoft Excel

play a significant role in helping researchers to analyze data. Sotiriadou, Brouwers, and

Le (2014) recommended the use of computer-assisted qualitative data software such as

NVivo, which helps researchers to analyze data by identifying themes, gathering insights,

and developing conclusions. NVivo software enables a detailed analysis of specific

topics. Further, once information was coded, NVivo delivers a methodical process in
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research to be able to assure validity and reliability (Zamawe, 2015). Derobertmasure and

Robertson (2014) and Sotiriadou et al. (2014) recommended the use of NVivo software,

which aids in data management, coding, sorting, and organizing the data in themes. Thus,

I applied NVivo Pro software, which assisted me in the data analysis process.

Researchers can use thematic analysis to be able to identify, examine, and record

meaningful themes appropriately within a data (Teruel, Navarro, González, López-

Jaquero, & Montero, 2016). The thematic analysis offers a systematic and accessible

approach to analyzing qualitative data (Pascoal, Narciso, & Pereira, 2014). Systematic as

it provides an orderly and logical way to analyze qualitative data. Also, thematic analysis

can be used to analyze large and smaller qualitative data, leading to rich descriptions,

explanations, and theorizing (Elo et al., 2014). Researchers who use thematic analysis

code qualitative data to identify themes and patterns for further analysis related to the

research question (Pascoal et al., 2014). Thus, researchers must ensure identified themes

address the research question (Braun, Clarke, & Terry, 2014).

Reliability and Validity

Establishing quality in a doctoral study requires ensuring mutual reliability and

validity, when collecting and analyzing data to support the findings of the research study.

Gheondea-Eladi (2014) pointed out reliability and validity are relevant standards to

ensure the rigor and credibility of the research findings. There are four essential criteria

for evaluating a qualitative study: credibility, confirmability, dependability, and

transferability (Cronin, 2014; Yin, 2014).

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Reliability

Researchers have to verify the reliability of the data and the ability to replicate

studies by reevaluating findings in different contexts to obtain the same results. As

identified by Elo et al. (2014), reliability refers to replication and consistency.

Dependability and consistency are pertinent to qualitative research. There is a distinction

between internal and external reliability. Internal reliability refers to ensuring consistency

throughout a research project, whereas external reliability refers to whether your data

collection techniques and analysis would produce consistent findings if they were

repeated by other researchers (Elo et al., 2014). Also, Hess, McNab, and Basoglu (2014)

indicated dependability ensures future researchers repeating the same research procedure

will get similar results. Dependability, which is the parallel criterion to reliability, proves

the finding’s validity through triangulation, member validation, and replication (Funder et

al., 2013). Researchers should detail the procedure of the research starting from the

selection of participants, data collection to the data analysis and presentation of findings

(Elo et al., 2014). Researchers ensure dependability to mitigate errors in their study

(Polit, 2014).

Error or bias on the part of participant or researcher affects the results of the

research (Carter et al., 2014). Thus, threats imply that researchers require being

methodologically rigorous in the way they carry out the study to be able to avoid

threatening the reliability of the results (Carter et al., 2014). I employed member

checking by discussing the interpretation of collected data with participants. Member

checking ensures data validation, mitigates error and preconceptions in the research

findings (Yin 2014). Member checking is a method to assure reliability and validity
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(Harvey, 2015). Reliability occurs when data collection and analysis is consistent and

accurate (Fan & Sun, 2013; Hess et al., 2014).

Validity

Validity refers to the accuracy of the data analysis and generalizability of the

findings. Researchers ensure validity by making sure the research findings are consistent

and accurate (Yin, 2014). As suggested by Cronin (2014), researchers confirm study

validity by ensuring the credibility, transferability, and confirmability of study results.

Validation is the process of verifying research and data analysis, and interpretation to be

able to prove data validity, credibility, and authenticity (Noble & Smith, 2015).

Researchers establish validity by ensuring research findings are consistent and accurate

(Yin, 2014).

Credibility is an internal validation process that establishes the trustworthiness of

research findings. Credibility, which is the parallel criterion to internal validity, refers to

systematic, in-depth research that yields high-quality data (Elo et al., 2014). Also,

credibility involves the judgment made by participants regarding a researcher’s findings

(Westerman, Spence, & Van Der Heide, 2014).

I employed the member checking strategy to be able to address credibility. There

are two validation techniques, which may assist to establish a quality of the research:

triangulation and member checking. As indicated by Burau and Andersen (2014),

triangulation involves using multiple sources of data and method of collections to be able

to confirm validity, credibility, interpretation, and authenticity of a research data.

Member checking involves sending the researcher’s interpretation of the data back to the

participants to enable them to check the result validity (Burau & Andersen, 2014). Also,
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allowing participants to note any observation that contradicts with what we have

collected; hence, this process enables them to validate the results (Allen, Schetzsle,

Mallin, & Ellen, 2014).

Confirmability refers to the quality and confirmation of the results by the

participants (Elo et al., 2014). Confirmability implies when a researcher does not

incorporate any of his/her perspectives, instead of direct confirmation from data collected

from participants (Yin, 2014). I employed the use of triangulation to be able to ensure the

confirmability of my doctoral study. The purpose of using multiple sources of data and

method of collections within one study was to ensure consistency in data interpretation.

The use of more than one data sources helps to ensure the validity of the findings

(Hussein, 2015). Researchers ensure validity by employing multiple sources to make a

consistent judgment of the study results (Noble & Smith, 2015).

Transferability is the responsibility of the person making the generalization.

Transferability, which is the parallel criterion to external validity, refers to the ability of

other researchers to generalize a study’s results (Elo et al., 2014). Transferability refers to

the ability to apply the findings of a study to other studies given similar circumstances

and subject matter (Houghton et al., 2013). To enhance transferability, I provided

sufficient context of the research and the assumptions central to the study. This will allow

readers to assess the transferability of my results to other areas of research.

Data saturation occurs when the participants offer no new information or

emergent themes. Researchers should stop collecting any new information when they

identify that there are no emerging ideas (Cleary, Horsfall, & Hayter, 2014). Researchers

use data saturation to ensure the validity of the research study (Yin, 2014). The member
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checking follow-up interview can help one reach data saturation and enhance the

academic rigor through obtaining in-depth information (Yin, 2014). Hence, data

saturation is a significant component of rigor in a qualitative research study (Morse,

2015). To achieve data saturation, I continued to interview participants until I reached a

point where additional interviews revealed no new information or emergent themes.

Transition and Summary

Section 2 began with the purpose statement. Next, I explained my role as the

researcher and provided in-depth information about the selected participants of the study.

The section also included reasons for choosing a qualitative research method and a

multiple case study design to address the research question. Furthermore, the section also

contained information regarding the population and sampling, ethical research, data

collection instruments, as well as data organization and analysis. I concluded the section

on how to assure reliability and validity of my doctoral study.

Section 3 began with the introduction that includes the purpose statement and a

summary of the findings. Next, I provided the presentation of the findings, the

applications to professional practice, and implications for social change. Furthermore, I

discussed recommendations for action and further research, and my reflections and

conclusions.
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Section 3: Application to Professional Practice and Implications for Change

In Section 3, I provide a thorough description of the findings of the research study

on strategies that business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues. In this

section, I present (a) an overview of the study, (b) the findings, (c) applications to

professional practice, (d) implications for social change, (e) recommendations for action,

(f) recommendations for further research, (g) reflections, and (h) a conclusion.

Overview of the Study

The purpose of this qualitative multiple case study was to explore strategies that

business leaders responsible for financial reporting use to develop and implement

effective internal controls for recognizing contracting revenues. I interviewed nine

participants from three private contracting companies in Qatar using face-to-face

semistructured interviews with open-ended questions. The data came from nine

participants, who had sufficient experience and technical knowledge in this field to be

able to answer the interview questions adequately. Of the nine participants, I purposively

selected three finance managers (PFM1, PFM2, PFM3), two cost control managers

(PCCM1, PCCM2), one chief internal controller (PCIC1), one estimation manager

(PEM1), one finance controller (PFC1), and one accounting manager (PAM1).

Participants signed an informed consent form indicating their willingness to participate in

the study. I named participants as PFM1, PFM2, PFM3, PCIC1, PEM1, and so forth in

order to protect their names and keep participation confidential. Additionally, I used

methodological triangulation, supplementing data collected through interviews with

supporting documents and observations. I collected and reviewed supporting documents

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that included financial statements, project budgets, and internal audit reports to validate

my findings and ensure data credibility.

The semistructured interviews contained nine interview questions. Each interview

lasted no more than 30 minutes. I audio recorded all interviews. After completing the

interviews, I converted the interview recordings to text and used NVivo Pro software to

analyze data, organize themes, and retrieve material easily and efficiently. I maintained a

high ethical standard during the interview process, demonstrating honesty and

professional competence. Meeting doctoral study rubric requirements was one of my

primary objectives. As a CPA with international audit firm experience, I had acquired

experience, knowledge, professional competence, integrity, objectivity, and honesty. All

of the above enabled me to exercise professional competence in my academic journey. I

presented the summary of findings to the participants for member checking, which

enhanced the accuracy of my interpretations of the information provided by the

interviewees. I organized the data collected into thematic groups. I later coded narrative

segments into themes. Lastly, I made a few adjustments to my interpretation of themes

based upon remarks from participants to ensure accuracy and preceded to a final write-up

of the findings of this study. The themes included (a) control environment, (b) control

activities, (c) systemized project budget, (d) accounting standards compliance, and (e)

risk assessment and monitoring.

Presentation of the Findings

The overarching research question that guided this study was the following: What

strategies do business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues? The

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population for this study comprised managers of private contracting companies located in

Qatar. Participants had unique codes (PCIC1, PFM1, PFM2, etc.) to ensure

confidentiality. I conducted face-to-face semistructured interviews with participants.

Through a process of methodological triangulation, I collected and reviewed supporting

documents including financial statements, internal audit reports, project budgets, and

casual observations to ensure the credibility of the data collected through interviews. The

findings from this study extend the knowledge created by existing studies, as presented in

the literature review. The conceptual framework for this qualitative multiple case study

was the COSO internal control conceptual framework developed in 1992 by the

Treadway Commission for the purpose of developing efficient and effective internal

controls (Moeller, 2014). Since 1992, using the COSO model has helped managers

design, operate, and evaluate the effectiveness of internal controls (Rose, Sarjoo, &

Bennett, 2015).

The five main themes identified through data analysis were (a) control

environment (CE), (b) control activities (CA), (c) systemized project budget (SPB), (d)

accounting standards compliance (AS), and (e) risk assessment and monitoring (RA&M).

I identified emergent themes through an analysis of the narrative segments from

interviews and other data sources. These emergent themes seemed relevant in exploring

strategies that business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues. Table 1

shows the interview questions, themes, and percentage of participant references.

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Table 1

Interview Questions, Themes, and Percentage of Participant References

Interview questions Emergent themes % of

participant
references
1. What internal control framework do you have CE, CA, AS, 80%
in place to assure compliance with revenue
recognition accounting standards? RA&M

2. What strategies have you used to ensure that the CE, CA, AS, SPB, 100%
internal controls are operating effectively
regarding contracting revenue recognition? RA&M

3. What are the key strategies managers use to CE, CA, AS, SPB, 100%
develop and implement appropriate internal
controls for recognizing contracting revenues to be RA&M
able to mitigate the risk of financial statement
manipulation?

4. How do you assess the effectiveness of the CA, SPB, RA&M 60%
strategies for using your budget as an internal
control mechanism to manage projects?

5. How did you address the barriers to CE, CA, SPB, 80%
implementing the strategies for using project
budget variances as a learning experience to RA&M
strengthen internal controls?

6. How does the accounting team validate the CA, AS, SPB, 80%
reliability and accuracy of revenue recognition in
the financial statements? RA&M

7. How does management adapt the internal CE, CA, SPB, 80%
control system for recognizing contracting
revenues? RA&M

8. What else would you like to share about your CE, CA, SPB, 80%
experiences on the effectiveness of the internal
control regarding the contracting revenue RA&M
recognition?
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Theme 1: Control Environment

All of the participants I interviewed acknowledged the importance of having good

corporate governance in the company. The main objective of corporate governance is to

increase the value of the company and enhance the shareholders’/partners’ equity, hence

ensure the effectiveness of the companies’ internal control. COSO (2013) and Rubino,

Vitolla, and Garzoni (2017) stated that the control environment component consists of (a)

organizational structure, (b) integrity and ethical values, (c) financial reporting

competencies, (d) authority and responsibility assignment, (e) human resources policies

and procedures, (f) management’s philosophy and operating style, and (g) board of

director’s oversight. Company leaders who insist on high standards of governance

mitigate many risks that arise from daily operations; these companies are then able to

attract further investors whose investments in the company may help to further growth

and development (Odorovic, 2013). Guo et al. (2015) found that material weaknesses in

internal controls decrease when management establishes more employee-friendly

policies.

Participants indicated the importance of maintaining a good working

environment, which enhances internal control in a company and ensures its effectiveness.

PAM1, PFM1, PFM2, PCIC1, PEM1, and PFC1 emphasized enhancing corporate

governance in the companies. Tak (2014) stressed that internal control is an important

part of an organization, and when it is ignored, the organization tends to lose power over

the governance of the entire company. Dimitrijevic (2015) emphasized that control

environment is important to the successful prevention of employee fraud.

Participants confirmed these comments. PFM1 acknowledged,

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Treating the employees with good corporate governance, improving their

knowledge and experience through regular training and coaching, keep their

morale up and motivated, will have a positive impact on the internal control

processes, which in turn mitigate the financial statements restatements caused by

intentional or unintentional accounting errors.

PCIC1, PEM1, and PFC1 emphasized the importance of communicating with,

educating, and observing employees in relation to various internal control procedures

developed by the management to ensure effectiveness and efficiency in running the

business. PFC1 stated, “the top management is focusing on improving the corporate

governance in the company to be able to increase efficiency and keep the morale of the

employees and managers up.” PFC1 also emphasized that “sharing ideas between the

employees and managers, and enabl[ing] them to participate in an economic decision will

motivate and incentive them to observe the implementation of internal control in the

companies.” Participants focused on regular training on IFRS, the code of ethics and

objectivity, and the ERP system because training and development in these particular

subjects improves knowledge and experience in contracting revenue recognition. PCCM2

acknowledged that “during the recruitment process, management gives more concern on

the candidates, who have sufficient experience in the contracting industry and knowledge

of the accounting standards related to revenue recognition.” Kehinde (2015) stressed that

management should ensure that the code of ethics and objectivity are well established in

the company to enhance the effectiveness of corporate governance to mitigate the

incidence of exogenous errors, fraud, and irregularities. Soltani (2014) found that factors
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that contribute to intentional errors include weak internal control, inefficient corporate

governance, accounting irregularities, and lack of core organizational values.

Maintaining good corporate governance and effective internal controls can

mitigate financial statements manipulation within an organization (Zalata & Roberts,

2016). The findings from the study indicate the importance of management’s

commitment to corporate governance to ensure that internal control is working

effectively and employees and managers are getting regular training in IFRS, ERP, and

the code of ethics to ensure effective internal control over contracting revenue

recognition.

To ensure data credibility and to validate the findings, I reviewed the internal

control reports generated by internal controllers from the years 2014 to 2016. The internal

controllers stressed in the observations part of the 2014 and 2015 reports the weakness of

internal control over project budget estimation and its effect on revenue recognition. In

the observation part, the internal controller highlighted that the project estimation had a

negative impact on the company’s profitability during the year 2014 because the

management did not calculate the completion date for the project accurately. Hence, this

inaccurate estimation caused the management to assume significant expenses that were

not included in the project budget calculation, such as expenses for labor or manpower. I

also noticed the problem of the accounting system the companies used in the previous

years. I noticed in the management response to the internal controller observation from a

2016 internal audit report that due to the error of estimation and weakness of internal

control over the project estimation, the management resolved to replace the old

accounting system with an advanced ERP system to tighten internal control and make it
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more effective, as well as improve the internal control system and comply with the entire

components of the COSO framework.

Theme 2: Control Activities

All participants indicated that the management had set proper internal policies and

procedures as a framework followed and implemented by employees and managers. The

control activities component of COSO indicated the organizational policies and

procedures used by management to implement adequate internal controls and ensure the

achievement of organizational goals (Dorsey, 2015). All participants stated that

implementing the internal policies and procedures effectively ensured the accuracy of

recognizing contracting revenue. I reviewed the internal policies and procedures for day-

to-day operations. These policies ensure the following: (a) appropriate segregation of

duties, (b) maintenance of appropriate records and relevant supporting documents, and

(c) regular review of the effectiveness of internal controls by the internal audit team. As

stated by PAM1,

I reviewed the internal policies and procedures of the three contracting companies

along with other significant points regarding the process of the entire cycles such

as procurement, costing and estimation, human resources, and revenue, and

noticed that all are well documented and circulated between the employees and

managers.

Segregation of duties among individuals in a company leads to the development

of an effective internal controls system. Frazer (2016) posited that inadequate segregation

of duties within small companies is one of the leading irregularities for employees.

Länsiluoto et al. (2016) confirmed that different individuals should handle the
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responsibilities for enhancing internal controls in the entire cycle, including revenue

recognition, to achieve appropriate segregation of duties and prevent financial statements

manipulation. PAM1, PEM1, PFM1, PFM2, PFM3, PCIC1, and PFC1 stated that

multiple authorizations are an effective control strategy to ensure that internal controls

are functioning effectively. All participants also stated that controls related to contract

costs were in place to ensure that the project budget included properly allocated costs.

Estimation managers calculate the project budget on the basis of the entire cost of the

specific project according to International Accounting Standard 11 (Malaj & Shuli,

2015).

PAM1, PEM1, PFM1, PFM2, PFM3, PCIC1, and PFC1 acknowledged that

management was using the following strategies to ensure that internal controls were

operating effectively regarding contracting revenue recognition. Table 2 shows the

combined internal control strategies I identified through the methodological triangulation

method employed during the interview process with seven participants.

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Table 2

Internal Control Strategies Regarding the Project Budget

Internal control strategies Methodological # of

triangulation employed participants
who
discussed
these
strategies
1. Ensuring that a contract is signed with the customer Observation 7
before starting any work.

2. Ensuring that the project budget includes all project Project budget 5
costs, such as direct, indirect, and overhead, and is approved
by the respective managers of the company.

3. Ensuring that all progress certificates/completion Project budget and 5

certificates are approved by the respective managers of the observation
company, project consultant, and client.

4. Ensuring that generated progress billing matches the Project budget and 5
percentage competed as per the progress financial reports
certificate/completion certificate.

5. Ensuring that quantity surveyor department submits Observation and 7

progress reports along with sufficient and appropriate financial reports
supporting documents to the finance department to check
the accuracy of the progress billing for the client.

6. Obtaining the proof of work completed regarding plans, Financial reports 7

photographs, and inspection report to ensure that work is
actually completed.

7. Obtaining client confirmation of financial statements Financial reports 7

assertions regarding the revenue element to ensure its
accuracy, completeness, valuation, and cut-off test to
validate the figures of the relevant accounting period.

8. Use in-house internal auditor’s report and external Internal audit reports 6
auditor’s management letter as a benchmark to improve any
weak point detected regarding the internal controls.
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Furthermore, PAM1, PEM1, PFM1, PFM2, PFM3, PCIC1, and PFC1 emphasized

that the following internal controls be in place to mitigate the risk of financial statements

manipulation regarding the contracting revenue recognition. Management should deploy,

modify, and replace control activities at all stages of the organization to mitigate risk and

meet operation objectives (Urbanik, 2016). PEM1 stated:

It is not only a matter of preparing a project budget, however; the most important

is to ensure that all relevant costs are included in the project budget along with a

proper allocation of profit margin, considering the risk of uncertainties the project

may face during the implementation phase, and monitoring it.

Table 3 shows the combined internal control strategies I identified throughout the

methodological triangulation method employed during the interview process from 7

participants.
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Table 3

Internal Control Strategies to Mitigate the Risk of Financial Statements Manipulation

Internal control strategies Methodological # of participants

triangulation who discussed
employed these strategies
1. Respective managers should approve initial Bill of Observation and 7
Quantity, and prepare the project budget accordingly. financial reports

2. Incorporating the project budget in the ERP system, and Observation 4

confim the employees and managers approvals in the system.

3. Management use cost benchmarking to prepare the Observation and 3

project budget. financial reports

4. Management estimate the entire project budget costs and Financial reports 6
profit margin at the inception of the contract.

5. Management ensure that there is a written prior approval Observation and 5

from the client for any variation clauses to the contracted financial reports
price and durations to avoid any unexpected foreseeable
losses.

6. Maintaining detailed cost schedule for each project Financial reports, 6

undertaken by the company to be able to compute the project budget, and
percentage of work completed (based on cost-to-cost observation
method) and according to the IAS 11 and IFRS 15.

7. Management re-measure the budgeted cost regularly to Financial reports and 7

be able to raise any variation to the clients and avoid any observation
unexpected foreseeable losses.

8. Maintaining a summary of all the contracted jobs Project budget, 5

including the followings: (a) contract identification (contract financial reports, and
number, and customer name), (b) contract value (including observation
initial value and subsequent variations), (c) costs details
(Budgeted, the total cost incurred previously, total project
budget cost, and cost incurred for the relevant financial
period), (d) revenue (contract value, revenue previously
recognized, and revenue recognized for the current period),
and (e) retentions and advances.
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Using the findings from this study revealed the importance of adopting the

accounting standards, accurately calculating the project budget, and strengthening the

internal controls to be able to validate all the accounting transactions related to the

particular project budget, and any transaction or job executed at the relevant project. The

findings from this study confirmed the conceptual framework and extended the

knowledge in the literature review. Participants explicitly expressed the importance of

having strong internal controls, and applicable accounting standards to be able to ensure

that revenue recognized indeed reflect the real figures that appearing in the financial

statements. PFM1 stated, “that complying with IFRS is the milestone behind a successful

and profitable project, and so, ensuring the sustainability of the company.” In addition,

PFM1 identified the following effective controls:

All deliveries to project site are supported by the relevant delivery notes along

with appropriate approvals, project progress report are approved by the respective

client on a regular basis (monthly), each progress report supports the evidence of

completed work (drawings, photographs, and any inspection certificate /report),

completion certificate or hand over certificate approved by the responsible

personnel by both client and project consultant.

All participants confirmed that revenue recognition is on the percentage of

completion method. Any difference between the percentage of completion method and

approved progress billing is reversed in the financial statements to be able to meet the

objective of contracting revenue recognition as per the IAS 11. Using these findings

confirmed the previous and current literature review in both accounting standards IAS 11

and IFRS 15 respectively. International Financial Reporting Standards (IFRS) require

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reporting revenue based upon the percent of completion of a project as of the last day of

the reporting year (International Financial Reporting Standards [IFRS], 2015a).

Theme 3: Systemized Project Budget

Participants acknowledged the importance of using an advanced ERP system,

which does not enable users to make any adjustment other than the authorizations

provided by the management to the respective managers. Also, participants indicated that

an advanced ERP system embeds a project budget module that enables the management

to follow up and monitor the budgeting process effectively and efficiently. Using an

advanced ERP system mitigates the risk of financial statement manipulation, enable

employees and managers to incorporate the project budget, and monitor it effectively and

efficiently from the commencement date of the project to the completion date as stated by

PFM2, “applying an ERP system enhances internal controls and decision taken by

management.”

Management is considering an advanced ERP system as the main strategy to

ensure an effective internal control over the contracting revenue recognition as stated by

PFM1, PFM2, PCIC1, PAM1, PEM1, and PCCM2. Participants acknowledged that

systemized project budget is a primary tool that gives us the ability to control and

monitor the project's status during the project’s execution phase. PFM1 stated, “a

systemized project budget enables us to monitor any deviation from the project budget,

budgeted versus actual cost incurred.” PFM1 stated, “systemized budget is enabling us to

mitigate the risk of incurring foreseeable losses.” PEM1 also added, “any cost incurred

and exceeded the budget require from the project and estimation managers a proper
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justification in which the management would decide to charge back the client to avoid

any loss.” PEM2 indicated as follows:

Management developed key performance indicators (KPIs) for each project

related to the budgeting process, such as Cost Variance and Return on Investment

(ROI) for the managers, and number of hours for the labors. This cost variance

and the projected ROI is used as an alarm on our ultimate profitability of the

project as stated by PEM1.

Managers used strategies to sustain the company's business by implementing an

effective internal control over the contracting revenue recognition. PCIC1 indicated,

We are using the following strategies to ensure that internal control is effectively

operating regarding the contracting revenue recognition, (a) automated

procurement process through the ERP system, (b) hourly labors properly allocated

and monitored through the ERP system, (c) incorporation of project budget in the

ERP system, and (d) payment process.

Using these findings revealed the importance of using an advanced ERP system in

the contracting companies to be able to incorporate and monitor the project budget

properly. Using these findings confirmed the literature review regarding the impact of

project budget on the contracting revenue recognition. The measurement of revenue in

the contracting contract is affected by various uncertainties depending on the

consequences of the future events (Tunçez, 2015). Further, the budget of the contracting

projects has a direct effect on the revenue recognition. Moreover, the substantial issue in

the accounting practice of the contracting and construction field is to know how to

recognize the revenues and allocate expenses within the scope of a contract (Tunçez,
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2015). When the ends, and uncertainties resolve, management reviews estimated

compared to actuals revenues and adjusts the records accordingly (Tunçez, 2015). Thus,

revenue recognition in the contracting sector is vulnerable to an intentional and

unintentional error at the highest level in the financial statements since the finance

department recognizes revenue according to IAS 11 (IFRSa, 2015).

Theme 4: Accounting Standards Compliance

All participants acknowledged that the management follows IAS 11 to recognize

the contracting revenue recognition. Using the findings from this study revealed the

importance of applying accounting standards properly to be able to meet the objective of

generating accurate financial reports. All participants indicated that they applied the

percentage of completion method to recognize contracting revenue. Starting January

2018, management has to follow IFRS 15, which is a new accounting standard related to

contracting revenue recognition, this new accounting standard replaces the IAS 11

(IFRSc, 2015). Nevertheless, PFM1, PFM2, and PFM3 acknowledged that there is no

significant difference in the contracting revenue recognition calculation between the IAS

11 and IFRS 15. Both methods rely on the project budget and cost incurred to recognize

the revenue or cost-to-cost method. IFRS (2015c) indicated that input method applies to

measure the progress of the project work. Input method includes cost incurred, and total

project budget cost (IFRSc, 2015).

The input method depends on the budget to recognize the revenue, and the

management assumption is the basis to measure the progress of the contracting project.

The project budget costs of both, the percentage of completion method, and input method

are the same costs and detailed as follows: (a) direct labor, (b) direct materials; (c)
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subcontractor costs, (d) allocations of costs related directly to contract activities, if those

depict the transfer of control to the customer, (e) costs explicitly chargeable to the

customer under the contract, and (f) other costs incurred solely due to the contract.

PAM1, PFM2, and PFM1 stated that there is an immaterial difference between these two

accounting standards regarding the inclusive of wasted materials and abnormal amounts

of labor or other costs because these items represent inefficiencies in the entity’s

performance and should be excluded from the measure of progress unless included at the

contract negotiations.

By adopting IFRS 15, companies have to recognize revenue according to the

project budget, and incurred cost as of the end of each accounting period. The findings

from this study confirmed the conceptual framework and extended the knowledge in the

literature review regarding IFRS 15. Also, Huefner (2015) stated that companies should

ensure that the following points are met to be able to recognize the revenue (a) identify

the contract with the client, (b) identify the performance obligations in the contract, (c)

determine the transaction price, (d) allocate the transaction price to the performance

obligation in the contract, (e) recognize revenue when (or as) an entity satisfies a

performance obligation. Hence as stated by PAM1, “the substance of the two accounting

standards is the same; however, there are new measurements regarding the form of the

contract that management should consider before signing the contract to be able to meet

the objective of IFRS 15.”

To ensure data credibility and to validate the findings, I reviewed the financial

statements and project budget of the companies. I was able to check the notes, which are

an integral part of the financial statements, and validate the percentage of completion
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calculation with the revenue recognition. I noticed that the management stated in the

notes to financial statements that revenue is recognized according to IAS 11, and I

noticed that in the notes, the management disclosed and met the classification and

disclosure of IFRS. I also reviewed the budgets of the projects, compared the figures of

the signed budgets with the figures appearing in the notes to the financial statements, and

documented improvements in the budget calculation the management exercised from the

year 2014 till the date of the last audited financial statements. I also compared the current

with previous projects budgets and noticed an immaterial difference between the amounts

allocated initially to the relevant projects budgets.

Theme 5: Risk Assessment and Monitoring

The importance of assessing the risk of the contract and monitor the

implementation phase was prominent in interviews with all participants. Croitoru (2014)

stressed in assessing risk; management would have to evaluate the adequacy of internal

controls and ensure the proper use of business resources. PFM2 stated, “we focus, and we

regularly monitor the costing of the project with the actual figures the company incur

through the implementation process.” The project budget is the platform that enables us

to monitor and prevent any deficiency in the internal control or any financial statement

manipulation. Continuous monitoring of the workflow as stated by PFC1:

Continuous monitoring starts by the following stages: (a) client request and bill of

quantities, (b) selecting the appropriate suppliers and sub-contractors, (d)

comparing the price list of the suppliers and sub-contractors, (e) approving the

final price of the suppliers and sub-contractors by the authorized managers, (f)

management should ensure that all the costs and expenses related directly or
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indirectly to the projects are considered in the calculation of the project budget,

(g) putting a certain profit margin by the top management, and finally (e) signing

the agreement.

PCCM1 indicated, “we are monitoring the daily activities properly in the projects,

and the managers at sites schedule a weekly meeting to see the progress of the project.”

Managers regularly monitor the internal control process through a regular review to be

able to ensure its effectiveness. Also, the internal auditor department is regularly doing

spot checks to ensure that the processes are effective at the group level. Management

monitor regularly the documentation process approvals of different projects individually

to ensure whether relevant authorized employees and managers adhere to the policies and

procedures.

PAM1 and PCCM1 emphasized the risk assessment process when initiating the

project. As stated by Dorsey (2015), conducting fraud risk assessment enhances

management’s awareness of internal control weaknesses and potential fraud

opportunities. PCCM1 acknowledged, “management assess the business before signing

the contract based on the (a) relationship history with the client, (b) origin of the client

(local/ foreign), (c) financial stability of the client, or creditworthiness, and (e) nature of

the contract.” Using the findings from this study revealed the importance of selecting the

appropriate clients, doing a proper risk assessment before signing any contract to be able

to prevent any difficulties during the implementation phase.

Application to Professional Practice

The findings from this study are relevant to improved business practice in that the

study provides additional information on the strategies used by business leaders

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responsible for financial reporting use to develop and implement effective internal

controls for recognizing contracting revenues. Business leaders responsible for financial

reporting will benefit from this study as they develop and implement effective internal

controls for recognizing contracting revenues. The specific business problem is that some

business leaders responsible for financial reporting lack strategies to develop and

implement effective internal controls for recognizing contracting revenues. The results of

this study can provide business leaders of private contracting companies with information

on how to enforce internal controls over contracting revenue recognition to ensure

business sustainability and prevent financial statements manipulation. Hari (2016) posited

that well designed internal controls provide reasonable assurance concerning the

effectiveness and efficiency of operations, the reliability of reporting, and compliance

with applicable laws and regulations.

Internal control is an important part of an organization, and when the management

ignore it, the organization tends to lose power over the corporate governance of the entire

entity (Tak, 2014). Mukhina (2015) acknowledged the importance of internal control to

the growth and success of businesses. Using the results of this study can provide business

leaders of contracting companies with information on (a) how to make internal control

more stringent, (b) improve the corporate governance, and (c) identify the importance of

using advanced ERP system, which enables them to incorporate project budget, monitor

it, ensure internal control effectiveness, and sustain profitability in the projects. Ensuring

adequacy of internal control in the project will mitigate financial statements

manipulation. Business leaders of small businesses can adopt cultures that discourage

employees and managers irregularities, through the proper recruitment process, and the
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implementation of strong internal controls (Frazer, 2016). The findings from this study

concurred the conceptual framework and literature review because business leaders in the

contracting companies can use the COSO framework to understand the components that

ensure internal control effectiveness over the entire organization. Business leaders can

use the conceptual framework to understand why the effectiveness of internal controls is

critical, the impact of good corporate governance over the stakeholders, effective

monitoring, and risk assessment over the project budget that lead to generate accurate

revenue recognition and mitigate the risk of financial statements manipulation. Using the

results from this study would provide professional practice of business, business leaders

of contracting companies with relevant information on COSO framework could design

and implement effective systems of internal controls to mitigate the possibility of

financial statements manipulation, and inaccurate contracting revenue recognition.

Implications for Social Change

Society could benefit from the results of this study because private contracting

companies represent a significant source of employment opportunities in Qatar (Jarkas &

Haupt, 2015). Kasztelnik (2015) noted that there is a significant increase in the value

relevance of revenue recognition after the adoption of International Financial Reporting

Standards (IFRS) along with an increase in the value relevance of accruals. Thus, the

results of this study could contribute positively to social change by enhancing financial

statement reliability. Financial statement reliability can lead to increased access to capital

and debt financing, which may increase business opportunities and improve employment

opportunities in Qatar. Furthermore, enhancing financial statement reliability promotes

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investors’ confidence in the financial statements and enable investors to make appropriate

business decisions, catalyzing economic growth through capital spending.

Business leaders could benefit from the findings of this study and adopt good

corporate governance, which leads to treating the employees and other stakeholders

properly, improving their knowledge and experience through regular training and

coaching, and keep their morale up and motivated. This process will have a positive

impact on the internal control processes, which in turn mitigate the financial statements

manipulations caused by intentional or unintentional accounting errors. Mitigating

financial statements manipulations and increasing profitability in the company could

increase business opportunities and improve employment opportunities in Qatar.

Increased employment opportunities could boost economic growth through capital

spending.

Recommendations for Action

The findings of this study led to some recommendations for action for business

leaders of contracting companies to develop and implement adequate internal controls for

recognizing contracting revenues. Other individuals who need to pay attention to the

results of this study include potential business leaders such as finance managers,

accounting managers, estimation managers, cost control managers, CEO, CFO, and

project managers, who all manage and run the operation of contracting companies and

interfere in the project budget calculation. Some of the recommendations derived from

reviewing the findings of this study and emerged themes are:

1. Management should emphasize developing the COSO framework in the

companies.
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2. Business leaders might gain knowledge on the importance of enforcing the

understanding of COSO framework among employees and managers to (a)

ensuring good corporate governance, and tone-at-the top (b) ensuring the

effectiveness of risk assessment, (c) enhancing the internal controls within an

organization and its control activities (d) ensuring the effectiveness of

communication within an organization, and (e) ensuring the effectiveness and

efficiency of monitoring.

3. Management has to develop a control framework and then educate and coach

employees and managers regarding its implementation.

4. Management should make sure that the employees and managers in the

finance department have enough knowledge and experience in the accounting

standards. Understanding the accounting standards and their application in the

accounting books is important to be able to prepare and generate accurate

financial statements.

5. Management should emphasize on using an advanced ERP system that

embeds modules connected to the accounting standards and especially IFRS

15.

6. Hiring people who have experience and knowledge in the ERP system and

accounting standards will enforce the understanding of the entire cycles and

ensure the effectiveness of internal controls along with generating an accurate

outcome of financial reports.

7. Management should also ensure that costing and estimating a new project

budget is crucial before signing any agreement. Signing an agreement does

 122
not suffice to ensure business continuity. Management should include in the

project budget all the costs, direct such as labor and materials, overhead

expenses, and other expenses related to the project.

8. Participating, sharing, and enhancing communication between the estimation

department, project management, and finance department are significant to

ensure that project will not incur losses but instead, will generate profit.

9. Although internal policies and procedures are effective, the policies may not

cover the entire components of COSO framework. This process leads to

educate and train individuals on (a) strengthen internal controls over

contracting revenue recognition, and make it more stringent, (b) implement

and monitor project budget, (c) gain knowledge of the new accounting

standards, (d) sustain the business of the companies, and (e) mitigate financial

statements manipulation.

Disseminating the findings from this study in conferences, such as the annual

American Accounting Association conference, could enhance learning in accounting, and

spotlight the importance of internal control over the contracting revenue recognition.

Management should mandate employee training and COSO awareness program as an

important prevention internal control weakness. Management should also incorporate

training programs that cover what constitutes a weakness of internal control over the

contracting revenue recognition, its effect, the effect of the project budget on the revenue

recognition, and how to report unusual activities. Management should tailor COSO

related training to individual employee job responsibilities.

 123
Recommendations for Further Reseacrh

The purpose of this qualitative multiple case study was to explore strategies

business leaders responsible for financial reporting use to develop and implement

effective internal controls for recognizing contracting revenues. Using the findings from

this study and as a foundation for future research, researchers could entail a deeper look

at best practice in exploring other strategies not covered in this study that managers could

use to ensure the effectiveness of internal control over contracting revenue recognition.

Business leaders of contracting companies can also benefit from a further study on how

to mitigate financial statements manipulation and apply an effective and efficient project

budget through an advanced ERP system.

Participants in this study consisted of managers of contracting companies in

Qatar. Further research may expand the geographical location outside Qatar. It was

noticeable during the data collection process that participants underestimated the effect of

ineffective internal controls and advanced ERP system on the contracting revenue

recognition. Future research on increasing awareness of the impact of internal control

over contracting revenue recognition could provide more specificity to organizations on

what controls to maintain, enhance or develop.

Reflections

In the process of completing this study, I experienced academic growth and

gained a better understanding of strategies business leaders responsible for financial

reporting use to develop and implement effective internal controls for recognizing

contracting revenues. In my effort to mitigate personal bias or preconceived ideas and

values, I refrained from personal bias by not offering any opinion or any information that
 124
might influence the interview. Hence, I used an interview protocol to stay on track, and

avoid any possible bias and ensured that I treated each participant the same without any

preconceived ideas.

It was unusual to see how hard the participants work to ensure business

sustainability and maintain profitability in the companies. They acknowledged that the

previous business problems management encountered were the benchmark to improve

their work in their organizations. The participants were passionate and thrilled about what

they do and willing to participate in the study and share their experiences on

implementing strategies to develop and implement an effective internal control over

contracting revenue recognition. After completing the study, I gained substantial insight

into participants perspective on the effectiveness of internal control over contracting

revenue recognition. The research experience has been invaluable. I discovered the value

of research and how to integrate processes in a research study. I have learned research

designs, sampling methods, data instruments, data collection techniques, data

organization, data analysis, reliability, validity, and complying with ethical standards in

research. I also learned how to interview, transcribe, member-check, and code data. I

believe the experiences from this research study have better prepared me for future

research challenges. Using the findings from this study could provide business leaders of

contracting companies with additional information on how to develop and implement

strategies to develop and implement effective internal controls for recognizing

contracting revenues.
 125
Conclusion

Some business leaders responsible for financial reporting lack strategies to

develop and implement effective internal controls for recognizing contracting revenues.

The purpose of this qualitative multiple case study was to explore strategies business

leaders responsible for financial reporting use to develop and implement effective

internal controls for recognizing contracting revenues. The conceptual framework for this

study was the COSO framework. The data collection methods I used included supporting

documents, casual observation, and semistructured interviews using open-ended

questions. Supporting documents encompassed financial statements, project budgets, and

internal audit reports.

The five main emerging themes from data collection included (a) control

environment, (b) control activities, (c) systemized project budget, (d) accounting

standards compliance, and (e) risk assessment and monitoring. The implications for

positive social change include enhancing financial statement reliability. Financial

statement reliability can lead to increased access to capital and debt financing, which may

increase business opportunities and improve employment opportunities in Qatar.

Furthermore, enhancing financial statement reliability promotes investors’ confidence in

the financial statements and enable investors to make appropriate business decisions,

catalyzing economic growth through capital spending. Using the findings from this study

revealed (a) the need for business leaders of contracting companies to employ strategies

to develop and implement effective internal controls for recognizing contracting

revenues, (b) help potential and existing business leaders of contracting companies

understand the importance of developing, and implementing effective internal controls

 126
within an organization, and (c) lack of corporate governance could result in financial

statements manipulation, intentional errors and give employees and managers an

opportunity to commit and conceal fraudulent activities.

 127
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Appendix A: Interview Protocol

Interview: Finding out about what strategies do business leaders use to develop and

implement effective internal controls for recognizing contracting revenues in Qatar.

1. I will contact the participants by telephone, e-mail, or meeting with them for

inviting them to participate in the interview.

2. I will begin the interviews by thanking the participants for their approvals to

participate in the interview. Afterward, I will make sure I introduce myself and

the purpose of the study to the participant.

3. I will explain the participants the voluntary nature to participate and the

flexibility to withdraw from the study at any time at their discretion.

4. I will obtain consent from the participants, and afterward, I will give a copy of the

informed consent form to each participant to ensure confidentiality.

5. I will inform participants of the interview procedures, which involves the use of

audio recording the interview.

6. The interview will be restricted to 30 minutes for responses to 8 interview

questions including any follow-up question, and I will mail a thank-you card to

each participant one day after the interview.

7. I will inform participants that I will make the transcribed interviews available to

them via email to ensure member checking validation and accuracy of their

responses.

8. At the end of the interviews, I will thank the participants for agreeing to take part

in the research study.

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Appendix B: Letter of Cooperation From a Research Partner

<Community Research Partner Name>

<Contact Information>
<Date>

Dear Antonio Ghaleb,

Based on my review of your research proposal, I give permission for you to conduct the
study entitled Effective Internal Controls for Recognizing Contracting Revenues in Qatar.
As part of this study, I authorize you to select from a sample of business leaders within
our firm to conduct interviews for data collection. Once you have completed your
interviews, you may conduct member checking interviews allowing the participants to
review your interpretive report of each interview. You have permission to take notes and
audio record the interviews at your discretion. you are also permitted to use the results of
the interviews to complete your case study and to share the information with the
committee members at Walden University. Individuals’ participation will be voluntary
and at their own discretion.

We understand that our organization’s responsibilities include: providing access to

participants, facility use, organizational progress reports and international business
policies, and use of personal time for research purposes. We reserve the right to withdraw
from the study at any time if our circumstances change.

I understand that the student will not be naming our organization in the doctoral project
report that is published in Proquest.

I confirm that I am authorized to approve research in this setting and that this plan
complies with the organization’s policies.

I understand that the data collected will remain entirely confidential and may not be
provided to anyone outside of the student’s supervising faculty/staff without permission
from the Walden University IRB.

Sincerely,

<Authorization Official>
<Contact Information>
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Appendix C: Invitation to Participate

<Date>

<Address Block>

Dear Potential Participant,

I am Antonio Ghaleb, a doctoral researcher at Walden University pursuing a Doctor of

Business Administration degree in Accounting. As part of my doctoral dissertation

research at Walden University, I invite you to participate in a research study to explore

strategies business leaders responsible for financial reporting use to develop and

implement effective internal controls for recognizing contracting revenues in Qatar. I

select you as potential participants to participate in my doctoral study because you have

sufficient experience and knowledge in the area of my research. I want you to make sure

that your participation in the study is voluntary and confidential and you can withdraw at

your discretion. Enclosed is an informed consent form. I request that you read the consent

form and ask any questions for further clarification before making any decision to accept

or reject this invitation.

Your participation depends on meeting the following criteria: (a) current

employees in high management position such as accounting managers, project managers,

estimation managers, and cost control managers, (b) more than 5 years professional and

industry experience, (c) willingness to participate in an audio-recorded interview and (d)

have developed and implemented internal control strategies over revenue recognition.

If you meet these criteria, kindly notify me via mobile +974 66443556 or e-mail

[email protected] about your availability.

I will contact you again via phone call to schedule the interview. The interview,
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which will last for about 30 minutes involves 8 open-ended questions and will be audio

recorded and transcribed. To ensure privacy, the location will be coordinated before the

interview at your convenience. I will provide you with the opportunity to conduct a

member checking interview for at maximum 15 minutes to review my interpretation of

the transcribed interviews to be able to validate completeness, and accuracy of themes.

Please do not hesitate to contact me for any further clarification or questions. I

appreciate your kind assistance and cooperation with my request.

Sincerely,

Thank you in advance for your kind cooperation.

Respectfully,

Antonio Ghaleb

Doctoral candidate

Doctorate of Business Administration: Accounting

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Appendix D: Interview Questions

To complement the research question, I will use open-ended semistructured interviews.

The interview questions are as follows:

1. What internal control framework do you have in place to assure compliance

with revenue recognition accounting standards?

2. What strategies have you used to ensure that the internal controls are

operating effectively regarding contracting revenue recognition?

3. What are the key strategies managers use to develop and implement

appropriate internal controls for recognizing contracting revenues to be able to

mitigate the risk of financial statement manipulation?

4. How do you assess the effectiveness of the strategies for using your budget as

an internal control mechanism to manage projects?

5. How did you address the barriers to implementing the strategies for using

project budget variances as a learning experience to strengthen internal

controls?

6. How does the accounting team validate the reliability and accuracy of revenue

recognition in the financial statements?

7. How does management adapt the internal control system for recognizing

contracting revenues?

8. What else would you like to share about your experiences on the effectiveness

of the internal control regarding the contracting revenue recognition?

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Appendix E: Protecting Human Research Participants Training Certificate

Certificate of Completion
The National Institutes of Health (NIH) Office of Extramural Research
certifies that Antonio Ghaleb successfully completed the NIH Web-based
training course “Protecting Human Research Participants”.

Date of completion: 09/12/2015

Certification Number: 1850214