The effects of accountants’ competence to quality of financial reports of public health units in Hanoi (Vietnam) when transforming to the accrual basis of accounting

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The effects of accountants' competence to quality of financial reports of public health units in Hanoi (Vietnam) when transforming to the accrual basis of accounting

Dinh Thi Thanh Hai

Аннотация

В контексте международной интеграции требуются экономические и финансовые инструменты управления, в том числе бухгалтерский учет должен соответствовать международным принципам и практике. В частности, переход на учет по методу количественно-суммовому (начисления) поможет Вьетнаму приблизиться к международному учету. Одним из препятствий для успешного перехода на учет по методу начисления является компетенность бухгалтеров, о которой не упоминалось ни в одном предыдущем исследовании. В данном документе изучается влияние компетенции бухгалтеров в организациях общественного здравоохранения в Ханое, Вьетнам, на качество финансовых отчетов при переходе с кассовых методов на методы начисления. Это исследование было проведено путем опроса и сбора данных от учреждений общественного здравоохранения в Ханое. Данные, указанные в этой работе, были проверены на достоверность и гипотезу с помощью статистической программой SPSS. Результаты исследования показывают, что компетентность бухгалтеров, включая знания, навыки и поведение, оказывает значительное влияние на качество финансовых отчетов учреждений общественного здравоохранения в Ханое.

Ключевые слова: компетентность бухгалтеров, качество финансовой отчетов, органы здравоохранения, учет по методу начисления, бухгалтерский учет на кассовой основе.

The effects of accountants' competence to quality of financial reports of public health units in Hanoi (Vietnam) when transforming to the accrual basis of accounting

Research article

Dinh Thi Thanh Hai *

Hanoi University of Industry, Hanoi, Viet Nam

* Corresponding author (dinhthithanhhai[at]haui.edu.vn)

Abstract

The process of international integration requires economic and financial management tools, including accountants must approach and conform to international principles and practices. In particular, the accurual method will help Vietnam get closer to international accounting. One of obstacles to successful change to accrual accounting is the competency of accountants, which has not mentioned in any previous study. This paper studies impact of competence of accountants in public health organizations in Hanoi (Vietnam) on the quality of financial reports when change from cash to accrual accounting. This study was conducted according to survey method and data collection from public health units in Hanoi. The data are tested for reliability and hypothesis through SPSS statistical software. The research results show that the competency of accountants including knowledge, skills and attitudes has a significant impact on the quality of financial reports of public health units in Hanoi.

Keywords: Competency of accountants, quality of financial report, public health entities, accrual accounting, cash basis accounting.

Introduction

In the context of international integration, it requires economic and financial management tools, so that accountants must be approached and conform to international common principles and practices to compare financial accounting information with other countries in the world. They are capable of providing complete and reliable information on the state financial situation when participating in international organizations.

In the public sector, traditional accounting systems often apply cash accounting. However, in the process of public financial reform for transparency of State finance, the trend of converting to accural-based accounting is being prioritized for development. Vietnam is not out of this trend, Circular No.107 (2017) [1], therefore was issued by Vietnam Ministry of Finance to change from cash to accrual accounting in public sector. However, the implementation of accounting as well as financial statements based on accruals will cause many difficulties and challenges for public sector in general and public health entities in particular. Several difficulties and challenges that entities face up with about change from cash-based financial statements to accural-based one are the competency of accountants because the accountant is the one who directly prepares the financial statements and is a resource of an organization (Gooderham, 2004) [6].

Theoretical basis

Public sector accounting and public sector financial report

The public sector shows clearly two accounting trends. They are the traditional accounting method that recognizes economic operations arising on the cash basis and modern accounting method that uses accrual basis to reognize. The cash accounting method is considered to be in line with requirements for money and budget management in the public sector because it will comply with rules and regulations. The cash accounting system helps public entities prepare reports on use of actual budget, and this is one of the most important reports of financial statements in the public sector. The accural accounting method helps entities record revenue and expenses accurately and appropriately as well as assess effectiveness for use of money sources. The use of accural accounting method can promote competitive efficiency and public administration, thereby saving costs for society. (Klaus, 1992) [11] suposed that converting from tradition into to accrual accounting in public sector will make financial report provide information in honest, useful, reliable and meet the public entity's resource control requirements.

The conversion from cash into accrual accounting in public sector is necessary, but there will be factors that obstruct such conversion leading to a failure. The study (Klaus, 1992) [11] indicated that a group of four factors that affect accounting innovation in the public sector, including: stimuli, social structural variables about information users, structural variables describing the politico-administrative system, and implementation barriers. For obstructions, the author refers to four factors that are organizational characteristics; legal system; professional qualifications of accountants and size of public units. He believes that the qualifications of accountants have a direct impact on innovation of accounting regime. The lack of professional knowledge and skills in accounting will be an obstruction that cannot be overcome in a short time and all efforts to spread and apply the new accounting system become meaningless.

Ouda Hassan (2004) [9] argues that implementation of accural accounting of public sector will improve financial report, performance assessment, and present information on the government's financial situation, manage asset and debt better. Accordingly, the author has developed a model of factors that lead to success of accural-based accounting innovation in developed countries and developing ones. In which the author has mentioned the willingness to change and emphasized the issues that need to be prepared for changes such as training, improvement of staff qualifications, motivation, promotion of staff spirit to be ready for innovation. In the study about transition requirements of accrual accounting in the public sector in 2008, Ouda Hassan continues to identify the groups of factors preventing such conversion. In which, the author included human resource characteristics in the group of important factors that affect process of conversion. The obstruction of human resource characteristics is lack of high quality staffs.

In the study of accounting conversion and reforms in developing countries, Harun (2012) [8] have pointed out four reasons for slowing Malaysian accounting innovation on an accrual basis, including lack of skilled human resources, especially in the field of accounting.

Competency of accountant

The concept of competency has appeared since 1970s, until now, many scholars have defined the definition of capacity. In 1992, Boam and Sparrow [3] defined capacity as “a set of behaviors associated with a job position to fulfill function and task of such position at the proficiency level”. Spencers (1993) [16] defines capacity as ability of an individual to fulfill the required skill requirements for a particular job. The groups of authors mentioned above share the same view that emphasizes the characteristics of individuals expressed when completing a job with superiority in performance or efficiency and divides those characteristics into five categories including motive, personality, awareness, knowledge and skills.

Lucia and Lepsinger (1999) [12] defined competency as a tool to identify the skills, knowledge, attitudes and personal characteristics needed to effectively implement a role in an organization, thereby helping organization achieve strategic objectives set out. Dubois and Rothwell (2004) [5] defined competency with more characteristics including knowledge, skills, personal images, personalities, action thinking, social awareness, perceptions about the surrounding world ,… McLean (2006) [13] defined briefly that capacity includes knowledge, experience and attitudes and is illustrated by KSAs (Knowledge, Skills, Attitudes).

Generally, capacity is defined as a collection of knowledge, skills, and qualifications of an individual expressed through specific behaviors for high efficiency of work that the individual undertakes. Competency is considered an important and essential requirement for an individual to be in charge of certain jobs and accomplish tasks.

Knowledge (professional knowledge) means understandings of a specific industry or field. Knowledge is understood as capacities of data information collection, understanding of problems, application, analysis, systhesis and assessment which are the basic capacities that an individual needs to receive a job. The more complex the job is, the higher the level of requirements for these capabilities is.

Skills are factors that make a difference in specific situations and jobs. Skills consist of experience and proficiency in handling tasks. It is the highest expression of applying knowledge or experience learned and accumulated into practice. Over time, skills can become conditioned reflexes. This is the capacity to perform tasks, turn knowledge into action. Usually, the skill is divided into main levels such as: imitation (observation and action), application (perform some actions by following the instructions), make use of action associated with (each situation), creative use (becoming natural reflexes) (Dave, 1975)[4].

Attitude is a point of view, a sense or somewhat a personality of the executor. This is an extremely important factor to create true and complete capacity. If two people have the same skills and knowledge, the attitude will make a difference. Specifically, when facing a problem, someone will find opportunities, others only see challenges.

The study of Vu and Chi (2016) [17] and colleagues also pointed out the effects of knowledge, skills and working attitudes of accountants on effectiveness of the accounting information system.

Information quality of the financial statement

accountants' competence financial report

The financial statement information provides and explains the financial situation of the units to the subjects using information for many different purposes. The quality of the financial statement depends on the quality of accounting information and is prescribed in accordance with accounting standards.

In view of the International Accounting Standards Board (IASB), the quality properties of financial statement information include: Understandable, reliable and comparable. IASB also puts restrictions on the quality of information that balances between benefits and costs; timeliness and balance between quality characteristics.

International public sector accounting standards (IPSASs) and international public accounting theory frameworks have established useful properties of information provided in public sector financial statements to users including: understandability; relevance and reliability; significance; honesty; neutrality; comparability and verifiability.

In the study of completing the public sector financial statements of Nguyen (2014) [14], the author mentioned the views on the quality of financial statement information in administrative non-business units such as: Relevance; understandability; reliability; comparability and compliance with policies on Budget and accounting law.

Research methodology

Based on theoretical research related to measuring the quality of public sector financial statement information to accounting on the basis of accrual and impact of accounting staff capacity on the quality of financial statement information, research model is built as follows:

The hypothesis is temporary answer to the phenomenon that's occurs based on theory or previous research. This study examines wwhether there is influence the competency of accountants over quality of financial statements' information. In the formulation of hyphthesis cab be describe as follows:

Hypothesis 1: There is relationship between knowledge of accountants and quality of financial statements' information.

Hypothesis 2: There is relationship between skills of accountants and quality of financial statements' information.

Hypothesis 3: There is relationship between atttitutes of accountants and quality of financial statements' information.

Data analysis and findings

The questionnaire is used as data collection instrument. 250 questionnaires are distributed to accountants working for public health entities in Hanoi. 216 questionnaires are returned and six questionnaires deleted due to outliers. Likert's scale with 5 levels is used to measure the relationship level between factors impacting on quality of financial statement information.

The value of Cronbachs' Alpha for “Skills” is 0.732, for “Knowledge” is 0.79, for “Attitude” is 0.838 which clearly indicates that the results are reliable. The reliability indicator shows that it must be more than 0.7 and these results are visible in this study.

Table 1 - Reliability coefficients

Correlation is significant when the value is less than 0.05. In this study, the knowledge, the skills and attitude are correlated with quality of financial statement information at value of 0.000. the results are significant.

Table 2 - Correlations

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

Table 3 - Multiple - regression of мdependent variables on quality of financial statements information

The value of F must be greater than 5. In this study, the value of F is 78.511 which are greater than 5. The level of significance is 0.000. The value of adjusted R square is 0.527. The results are justified. The standardized coefficients Beta value of 0.570 indicates that variable “Attitude” has highest level of impact on variable “Quality of financial statements information”. VIF value of all varriables is less than 10. This theorerically means that no multicollitnearity.

Recommendations and conclustion

The results of study show the effect of accountants' competency on the information quality of financial statements information in Hanoi public health entities when accrualization. The attitude has the highest level (? = 0.570) of impact on quality of financial statements information. This result confirmed that attitude of accountants must be improved. Accountants must be ready to update new knowledge to improve their job performance. In addition, accountants need to determine their responsibilities when working and comply with professional ethics standards. When working with a high level of responsibility, accountants will ensure the quality of information in the financial statements.

The study results also show that the accountants' skills will affect the quality of the financial statements information. In order to improve the skills of accountants, entities need to facilitate for them to participate in training courses on information technology skills in accounting. The proficient use of informatics tools in accounting will reduce the workload for accountants while the accounting information is more accurately processed.

In terms of professional knowledge, entities need to facilitate for accountants to attend training courses to update new knowledge as soon as there is a change from the Ministry of Finance. For accountants, they must reinforce their knowledge of accounting principles on accrual basis, in the process of performing the accounting work as well as making financial statements on the accrual basis, they must discuss and ask for advice from public financial experts of financial institutions on the same level or financial officials of managing entities to avoid misinterpretation of the quality of information on financial statements that do not meet requirements.

The research only focuses on studying the factors of accountants' competency affecting the quality of financial statement. The scope of study is focused on the health entities, not to mention other areas in the public sector. Therefore, this is a limitation of the study that can continue to be clarified in the next studies.

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