Financial Reporting Disclosure on the Internet: an International Perspective
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FINANCIAL REPORTING DISCLOSURE ON THE INTERNET: AN INTERNATIONAL PERSPECTIVE Submitted by Tehmina Khan BCom, Melbourne University MBus (Accounting) Victoria University A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Faculty of Business and Law School of Accounting Victoria University Footscray Park, Victoria, Australia November 2006 DECLARATION I, Tehmina Khan, declare that the PhD thesis entitled Financial Reporting Disclosure on the Internet: An International Perspective is no more than 100,000 words in length, exclusive of tables, figures, appendices, references and footnotes. This thesis contains no material that has been submitted previously, in whole or in part, for the award of any other academic degree or diploma. Except where otherwise indicated, this thesis is my own work. [This thesis may be available for loan and limited copying in accordance with the Australian Copyright Act 1968]. ----------------------------------- ------------------- Tehmina Khan Date ii ACKNOWLEDGEMENTS I would like to start by giving my thanks to Allah Almighty for giving me the strength and courage to reach this stage. I would also like to extend my respect to Prophet Muhammad, peace be upon him. I would like to acknowledge the people who provided me with guidance and support to complete this very important part of my career. My first and foremost gratitude goes to my principal supervisor Dr. Robert Clift, for his extremely valuable feedback and timely counsel. I am also thankful to Dr. Stella Sofocleous for all her beneficial advice. I am grateful to Dr. Victoria Wise for all the assistance and encouragement. Thanks are also due to the School of Accounting and Finance. I would like to extend a very special thanks to my husband, Dellsea, for his encouragement and support, for always being there to provide those precious words of encouragement whenever I needed them the most. And to Mum, for all her patience and understanding, and to my sister Amna, for always reminding me for whom I can be and what I can achieve. I also wish to acknowledge the blessing of Dellsea’s and mine’s little one (due in November 2006). She has been a major inspiration and strength for me to complete my thesis. iii TABLE OF CONTENTS DECLARATION ........................................................................................................................... II ACKNOWLEDGEMENTS ..................................................................................................III LIST OF TABLES........................................................................................................................ X LIST OF EXHIBITS..................................................................................................................XI LIST OF FIGURES.................................................................................................................. XII ABSTRACT ..................................................................................................................................XIII CHAPTER I INTRODUCTION ............................................................................................................... 1 1.1 OVERVIEW......................................................................................................................................1 1.2 INTERNET AS AN INFLECTION POINT.....................................................................................1 1.3 WORLD WIDE USE OF THE INTERNET ....................................................................................1 1.4 COMPANIES’ USE OF THE INTERNET .......................................................................................2 1.5 THE INTERNET AND FINANCIAL REPORTING:AN OVERVIEW...........................................3 1.6 RESEARCH QUESTIONS ...............................................................................................................5 1.6.1 GENERAL................................................................................................................................. 5 1.6.2 FUNDAMENTAL REPORTING ELEMENTS........................................................................ 6 1.6.3 CORPORATE SOCIAL RESPONSIBILITY REPORTING ELEMENTS............................... 6 1.6.4 CORPORATE GOVERNANCE REPORTING ELEMENTS .................................................. 7 1.7 QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION .............................7 1.7.1 UNDERSTANDABILITY.........................................................................................................8 1.7.2 RELEVANCE............................................................................................................................ 8 1.7.2.1 MATERIALITY ........................................................................................................................... 8 1.7.2.2 TIMELINESS ............................................................................................................................... 9 1.7.3 RELIABILITY AND FAITHFUL REPRESENTATION ......................................................... 9 1.7.4 COMPLETENESS................................................................................................................... 10 1.7.5 COMPARABILITY................................................................................................................. 10 1.8 OUTLINE OF THE STUDY...........................................................................................................11 CHAPTER II THE THEORETICAL FRAMEWORK ................................... 13 2.1 INTRODUCTION ...........................................................................................................................13 2.2 SOCIOLOGICAL AND ACCOUNTING THEORIES IN THE CONTEXT OF ONLINE FINANCIAL REPORTING ...........................................................................................................14 2.2.1 COMMUNICATIONS THEORY ........................................................................................... 14 2.2.1.1 INFORMATION SOURCE ........................................................................................................ 14 2.2.1.2 CHANNEL ................................................................................................................................. 15 2.2.1.3 DESTINATION.......................................................................................................................... 15 2.2.2 ENTITY THEORY.................................................................................................................. 16 2.2.2.1 INTERNATIONAL MONETARY FUND (IMF)....................................................................... 17 2.2.2.2 INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) ..................................... 17 2.2.2.3 INTERNATIONAL FEDERATION OF ACCOUNTANTS ...................................................... 19 2.2.2.4 WEB TRUST .............................................................................................................................. 20 2.2.2.5 COMMISSION DES- OPERATIONS DE BOURSE (COB) ..................................................... 20 2.2.2.6 FASB INSTITUTIONAL FRAMEWORK (UNITED STATES OF AMERICA)...................... 21 2.2.2.7 OTHER U.S. REGULATION..................................................................................................... 22 2.2.2.8 THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISION (ASIC)................. 22 2.2.2.9 AUDITING AND ASSURANCE STANDARDS BOARD (AUSTRALIA).............................. 23 2.2.2.10 SUMMARY REGULATORY BODIES AND THE ENTITY THEORY................................. 24 2.2.3 ENTERPRISE THEORY (SUOJANEN 1954)........................................................................ 25 2.2.4 REGULATORY CAPTURE THEORY (POSNER 1974) ...................................................... 25 2.2.5 USER’S COGNITIVE LEARNING PROCESS...................................................................... 26 iv 2.2.6 HUMAN-COMPUTER INTERACTION THEORIES............................................................ 27 2.2.6.1 INFORMATION FORAGING THEORY .................................................................................. 27 2.2.6.2 INFORMATION OVERLOAD THEORY................................................................................. 27 2.2.6.3 INFORMATION MODELLING ON THE INTERNET............................................................. 29 2.2.6.4 QUANTUM THEORY OF INTERNET VALUE ...................................................................... 30 2.2.6.5 DIGITAL IMPRIMATUR .......................................................................................................... 30 2.2.7 POST MODERN COMMUNICATION THEORY................................................................. 31 2.2.8 THE INTERNET: A PARADIGM SHIFT FOR COMMUNICATION.................................. 31 2.2.9 GLOBALIZATION AND THE INTERNET .......................................................................... 33 2.2.10 SUMMARY OF THEORIES................................................................................................. 33 2.3 COMPANIES’ USE OF THE INTERNET FOR FINANCIAL REPORTING...............................35 2.3.1 LYMER 1997 .......................................................................................................................... 35 2.3.2 MARSTON & LEOW (1998).................................................................................................. 36