1.1 Statement of the ProblemFrom article of the Factors that affect the qualityof Financial Statements Audit in Vietnam business (2015) the development of a market economy,especially the financial markets is asking for transparency and truthfulness ofthe financial information with high quality. The information in the financialstatements will impact directly and indirectly to the rights and decisions ofinvestors. Independent auditors play a role of evaluating truthfulness andreasonable financial information in enterprises, however there are still risks It is the fact that, rapidly diversification of thecompanies on the earth implies us timely growing of the world financial transactions.Yet even if the numbers of the companies in every countries are rapidlyincreasing at increasing rate, international accounting standard board(IASB,2008)recommend that as all of them that have to prepare their financial report justwithin in line of updated standard, conceptual framework and follow the sameaccounting principles(IASB paragraph13).Accordingto Heidi Vander Bauwhede article what factors influence financial Statement quality(2001),thePotential factors that influencefinancial reporting are the following: management’s decisions (which areinfluenced by various relations with stakeholders to the company), quality ofexternal governance mechanisms (i.e. audit quality), quality of internalgovernance mechanisms (i.
e. quality of the board of directors), regulation asto financial reporting and external and internal governance mechanisms.Goodgovernance is a clean, respectable government a corruption free. (Minister ofState for Administrative Reform, Taufiq Effendi, 2007). Implementation of goodgovernance, including through the obligation for all local governments toprepare Local Government Finance Report (LKPD). Survey of transparency International Indonesia(TII, 2010) in the Annual ReportReported that corruption triggering factors ( driver corruption ) to speed up process bureaucratic , is very prominent in Indonesia.
Booz AllenHamilton (TII,2010) states that the higher the level of corruption shows accountability isnot completely finished. When we come toEthiopia, according to Kirubel(2016), IMF ranked Ethiopia as among one the fivefastest growing economies signifying 11th consecutive year economic growth posting10.3% growth in 2013/2014(AEO, 2015).Currently the government is promotingprivate investment and the economy is expected to shift from being agrarian toindustrial at the end of the second GTP. In 2013/14 the industrial sectorcontributed 14% of the country’s GDP, signifying the highest (21.2%) growthfrom other sectors (MoFED, 2014).Howeverwhen we refer World Bank on the Reportlike Observance of Standards and Codes, there is no specific set of accountingregulations in Ethiopia and therefore accounting practices vary acrossinstitutions (World Bank, 2007). But now the first financial reporting Federalstate regulatory body is established for the first time in Ethiopia byregulation entitled Council of Ministers Regulation to provide for the establishmentand to determine the procedure of the Accounting and Auditing Board of Ethiopia(Council of Ministers Regulation No.
332/2014) pursuant to 3 Article 4(1) ofthe Financial Reporting Proclamation No. 847/2014. Accordingly, provision ofArticle 3(1) of this regulation describes that “The Accounting and auditingBoard of Ethiopia (AABE) is hereby established as an autonomous governmentorgan having its own legal personality.” AABE consists of 12 members whichincludes one representative from each of various Ministries Melese Hailemariam(2016).Sincethere were rare studies done on financial reporting qualities of Ethiopiancommercial banks(public and private sectors) that gave emphasis on newlyadopted conceptual frameworks and standards that are respected by accountingstandards so that the current researcher is motivated to fill this highlyexisted knowledge gap by giving attention to factors that are affectingqualities of financial reporting qualities like that of professional competencyof banks employees, ownership right, governmental law and degree ofrelationship between common standards and actual standards through benchmark offundamental qualitative characteristics and the enhancing qualitative characteristics and timeliness) as definedin ‘an improved Conceptual framework for financial Reporting’ of the FASB andthe IASB (2008), on Commercial banks of Ethiopia (Comparative Study On Public And private Sectors).