A Focus on Governmental Aspects and Trends

(Accounting & Accountability Perspectives)

Tamer Aly Elnashar

2023

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…………………………………………………………………………

A Focus on Governmental Aspects and Trends

(Accounting & Accountability Perspectives)

…………………………………………………………………………

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Book Summary
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This book aims to present various important aspects and trends regarding the governmental
accounting and reporting models in the international environments. Whereas, Governmental
accounting and reporting models are multiple and ununified internationally, and there are
trends in the governmental environments to take into account in this book. The first chapter
lists the governmental accounting and reporting models, and investigates which governmental
accounting and reporting models most cause the differences among countries. The second
chapter shows how the changes in governmental accountability can impact the change in total
governmental revenues relying on analysing and studying the governmental financial reports
and the governmental accounting information. Both chapter one and two encourage future
research to expand analysis and empirical evidence in this regard. The third chapter proposes
extending dimensions of forensic accounting to influence various significant governmental
perspectives, for its role in positively impacting and improving the governmental
organizations’ strategies and accountability, which in turn, help contribute to the economy
growth, reduce corruption and improve organizational behaviors. The fourth chapter and the
final presents a business approach recommended to apply to the governmental environments,
which is focusing on showing how to predict and examine the impact of inclusive business on
the internal ethical values and the internal control quality while conceiving the accounting
perspective in the governmental sectors, as to help contribute to sustainability growth, reduce
poverty and improve organizational culture and learning, the chapter also presents that
governmental accountability can be monitored and controlled using the balanced scorecard as
to tackle corruption.

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Table of Contents

Chapter (1)

Discriminant analysis to the postulated international perspectives of

governmental accounting and reporting models …………………..………….……….. 5

Chapter (2)

The impact of the changes in governmental accountability on the change in

governmental revenues .……………………………………………………………....... 32

Chapter (3)

Extending dimensions of forensic accounting and the organizations’ strategies and

Accountability: A Governmental Perspective ……………………...………………….. 52

Chapter (4)

Like business approaches to develop governmental organizations ……………………. 63

The impact of inclusive business on ethical values and internal control quality:
An accounting perspective ……………………………………………………………... 63

Governmental balanced scorecard to tackle corruption in the governmental sector.…… 84

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 Chapter (1) : Discriminant Analysis to the Postulated International
Perspectives of Governmental Accounting And Reporting Models

ABSTRACT: Governmental accounting and reporting models have shown issues of differences in the
postulated international perspective in this regard. This paper investigates which governmental and accounting
models most cause the differences among countries. Using a discriminant analysis with linear discriminant
function, this paper finds that models of governmental budgetary accounting model, governmental integrated
reporting model, the no clarity of governmental sustainability and integrated reporting models, and the
governmental mixed accounting model are the most significant cause of differences and separations of
governments, particularly for the top countries of high economic indications.

Keywords: governmental accounting, governmental reporting, postulated international perspectives,

comparability, transparency, full disclosure.

INTRODUCTION

Governmental accounting is one of the most important fields for research, due to its

different nature from country to another. The major focus of this field relies on how the

country’s government can find the resources to allocate, and use for future planning and

development, subsequently, evolves the role of governmental accounting to fulfill the needs

of the economy. The Governmental Accounting Standards Board – GASB (2006) provides a

sufficient bases for the USA government to use its funds in an appropriate way. Also, the

GASB (1987) has maintained that governmental financial reports should be useful to the

interested parties to evaluate the effectiveness of governmental services.

Mussari (2014) shows the importance of globalization to increase the need and the

request for international governmental accounting standards aimed at unification of

standards, therefore appeared several international governmental bodies working to adopt

international standards, for example, the United Nations (UN), Organization for Economic

Cooperation and Development (OECD), European Commission, World Bank, and

International Monetary Fund (IMF) ( Christiaens et al. 2010& 2015; Jones& Caruana 2014),

in addition to the International Federation of Accountants (IFAC), as the public sector

committee responsible for governmental and public sector accounting standards (IFAC 2018).

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 To the extent of my knowledge, most of the governmental accounting models rely on

the budget approach, to show budgeted disbursements and obligations, and use ways of

obtaining a measurement of performance through the use of budgetary and economic and

financial information. Nevertheless, until few years in the past, governmental accounting is

criticized for not including accruals of any kind (e.g., Caperchione &Mussari, 2000; Luis et

al., 2009). Christiaens (2000) shows (in the previous decade) that traditional budgetary

accounting system encounters the lack of global picture, and does not provide management

information, also, assets and liabilities are not disclosed. Therefore, and on the other hand,

evolves the need for developing governmental accounting system, and such budgetary system

as well, as to include (for example) accrual accounting model in the governmental accounting

system, in addition to developing this entire system.

Christiaens &Rommel (2006) present that the reform of governmental accounting

introduces business like accrual accounting system, which is assumed to increase

accountability and management tools, also, assumed to increase transparency of the financial

situation of governmental organizations. Oulasvirta (2014) and Jones & Coruana (2014)

assure that accrual accounting may best serve the needs of public sector stakeholders, and

may help improve financial reporting for public sector entities, and the publication of

financial statements of various public sector entities could also improve accountability and

transparency.

Ever since, the criticism facing governmental accounting model is expected to cause

the reform for this model, for the purpose of providing relevant and useful information to the

users seeking answers to questions as: (i) What is it that the government wishes to achieve?

(ii) How will it attain those achievements? (iii) How does it know if it is succeeding? (e.g.,

Caperchione 2000; Jesus and Jorge 2001; Christiaens &Vanhee 2003; Sharma &Wanna 2005;

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Department of Finance &Administration 2003; Bolivar et al. 2006; Yamamoto 2006; Copley

&Douthett 2014).

Surfing the web for governmental financial reports, I focus my surfing on the

governmental financial reports issued by the top countries of highest economic indications in

the world, ( presented by the International Mutual Fund (IMF), and other international

organizations working to adopt governmental international accounting standards), which

show highest economic indications, whereas this list of top countries is used in this paper as a

guiding sample for which governmental accounting models and standards are adopted. My

initial analysis (without any statistical reasoning) shows variances in the governmental

accounting models and standards adopted.

As a consequence, I raise the major question of this paper as: “What is (are) the most

effective governmental accounting and reporting model(s) to support the postulated

international perspectives in this regard? “. By answering this question, this paper can

contribute to the governmental accounting literature by providing assurance to follow

international standards that best meet the economic and user’s needs, whereas users expect to

rely on a relevant and useful governmental accounting information to make good economic

and investment decisions.

My results provide evidence that the most significant governmental accounting and

reporting models (best affect the postulated international perspective in this regard) are the

budgetary accounting model, the governmental integrated reporting model, and the

governmental mixed accounting model, and also an evidence that there is unclear

representation for the governmental sustainability and integrated reporting model among a

significant number of governments of countries under study.

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 The results can contribute to the literature by assuring the need for adopting

international standards to follow by countries for their governmental accounting and

reporting models, for the purpose of unification and possessing a high quality governmental

accounting and reporting systems adopted by all countries worlds apart, which in turn would

increase the opportunities of growing international investments and economic indications.

The remainder of this paper is organized as follows: the next section discusses the

literature review and hypotheses in the field of governmental accounting and reporting,

followed by the research design, then analysing the results, and finally the summary

discussion and concluding remarks.

LITERATUE REVIEW

Governmental accounting previous studies refer back to several past decades,

beginning from the 80’s. From the special attributes of governmental accounting and its direct

relation to the political and economic influences, most of the significant views surrounding

this field of research are influencing the potential economic growth in their countries, and as

a result governmental accounting reform and improvement would be negatively affected.

Cheng (1992) integrates the findings of prior accounting research with both the theoretical

and empirical work in political science, public choice, and public administration, and presents

how accounting policy choices and decisions to report financial information are influenced by

a number of factors in the political environment. Martani and Lestiani (2012) show assurance

to Chang results, where findings show that political factors appear to influence the reporting

of financial information, and financial decision making in the public sector is influenced by

both economic and political considerations.

Therefore, I focus on contexts that designate the major factors of governmental

accounting and reporting issues, and deliberations surrounding governmental accounting and

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reporting models, whereas most of the previous studies are classified into two categories, (i)

studies abstracting same contexts of governmental accounting and reporting issues, (ii) and

studies beyond the contexts of governmental accounting issues. Moreover, I couldn’t skip the

old and the most old previous studies that refer back to the 80’s and after, due to the

significant historical contexts abstracted in these studies and are still influencing several

international perspectives for governmental accounting and reporting models.

To the extent of my readings, researches of the first category (same context of major

governmental accounting and reporting issues) show views in regard to the field of

governmental accounting measures, processing, disclosing and reporting. The first view is

regarding accrual accounting model in the governmental accounting system. Caperchionel

(2000) shows that the shift of accounting systems from a cash basis to an accrual basis in the

governmental accounting is put forward by many as source of innovation in governmental

accounting, and finds that there are no indisputable elements nor objective findings to sustain

that accrual accounting actually improves information that is useful in making economic

decisions, and consequently the performance of public governmental entries.

On the other hand, Torres (2004) shows that full accrual basis fit into the prevalent

public administration styles of western democracies and into countries with different levels of

developments, soon afterwards, Christiaens (2006) argues that some technical issues

concerning the use of accrual accounting instead of carmeralistic accounting have been

raised, and Jorge et al. (2007) show how governmental accounting reform is going towards

international harmonization, and problems raised are faced by several countries. Apparently,

accrual accounting raises conflictions and controversial views in the governmental

accounting literature (noticeably in the international perspectives among several countries),

which currently can be assured by analyzing published governmental financial reports of

several countries worlds apart, whereas these conflictions remain standstill or expected to

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remain standstill. According to this, the reforms in the public sector accounting and financial

management (as public sector is a part of the governmental accounting system and

governmental financial management system) have attracted considerable interests all over the

world (Stamatiadis 2009).

Also, Stamatiadis (2009) reveals in an empirical study a number of benefits from the

use of accrual accounting information, and the difficulties encountered during the

implementation phase. Christiaens et al. (2015) examines to what extent international public

sector accounting standards (IPSAS) is adopted in central local governments worldwide, and

what factors affect the adoption, and the study reveals an important move to accrual

accounting. Moreover, Biondi (2013) shows how budgetary accounting should complement

accruals-based-accounting in public sector governmental accounting systems, and Jesus and

Jorge (2014) also find that cash-accrual adjustments are more diverse and tend to be material

in relation to the final deficit/surplus, and find that countries still adopting cash-based-

budgetary reporting in governmental accounting are raising questions concerning the

reliability of the deficit/surplus they report.

As accrual accounting [(in accordance to both generally accepted accounting

principles (GAAP) and international financial reporting standards (IFRS)] focuses on systems

as accrued revenues and incurred expenses, it reflects an income statement approach. Hence,

I find Oulasvirta (2014) considers developing an income statement and expenditure-revenue

accounting approach for governmental financial accounting purposes to be more valuable.

Conversely, Christiaens et al. (2015) find that there still remains a level of reluctance mainly

in central governments, especially in countries where business like accrual accounting has

been developed.

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 The second view is in regard to: the governmental accounting disclosures and

reporting, for example, Robbins and Austin (1986) discusses the determinants of

governmental disclosure quality, and examines the robustness of a simple indexing procedure

in evaluating determinants of disclosure quality in governmental financial reports, and they

find that there is no material effect on the results of possible determinants of disclosure in

governmental financial reporting. On the other hand, Ingram and DeJong (1987) find non –

GAAP reporting requirements appear to have a significant effect on the financial reporting of

local governments under study. Christiaens and Vanhee (2003) confirm the need for

additional non-financial reporting of governmental assets and investments, which are

considered underestimated items. Herawaty and Hoque (2007) find inadequate disclosures in

both mandatory and voluntary levels, and find inadequacy in performance reporting within

government departments, which all highlight the need to improve access to performance

information in order to enhance public accountability, their study assists governmental

departmental management to continue improving their quality of governments reporting.

In regard to political aspects related to governmental reporting, Martani and Lestiani

(2012) present a political influence in the environment of governmental accounting, as they

show that governments tend to issue financial statements and provide complete information,

if voters (through the parliament) actively evaluate the performance of governments, or

voters determine the local budget based on evaluation of past financial performance reflected

in the financial statements.

Moreover, Copely and Douthett (2014) find that non-financial disclosures are an

important element when providing information about governments to assist users in making

economic decisions. Nevertheless, there are several studies that focus on accounting choices

and quality of governments’ financial report, these studies include the study of disclosures of

relevant governmental information and raising questions related to: (i) why accounting

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choices are made?, (ii) what factors influence governmental accounting disclosures?, (iii)

why there is a lack of homogeneity among different governmental accounting systems among

countries?, (iv) what are the problems of financial reporting in the governmental accounting?,

(v) what is the effect of governmental financial reporting on accountability? (e.g., Watts and

Zimmerman 1986; Cheng 1992; Benito et al. 2007;Yamada 2007; Perez and Hernandez 2009;

Steccolini 2013).

The third view, is in regard to the issue of comparability in the governmental

accounting and reporting, where Caperchione and Mussari (2000) show that a major

challenge to the comparative international governmental accounting research lies in dealing

with incomparable, for example, incomparable can be witnessed in the divergences

concerning the governmental accounting principles, such as cash basis versus accrual basis,

and measurement such as historical cost versus market value criteria, differences also can be

found in several specific issues as : scope of the reporting entity, preparation of consolidated

financial statements, and transactions between governments and state-owned companies,

therefore comparability and modernization are direct benefits of adopting international

governmental accounting standards (e.g., Jesus and Jorge 2014; Mussari 2014; Brusca and

Martinez 2016).

As a result, several prior studies reveal the necessity of implementing international

public sector accounting standards (IPSAS) to reform governmental accounting and

reporting, where there is a scarce contribution of IPSAS to the governmental and reporting

process. Nowadays, studies show that several counties have made efforts to adopt this IPSAS

(e.g., Christiaens 2013; Lopes et al 2014; Oulasvirta 2014; Agasisti et al 2015; Brusca and

Martinez 2016).

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 The second category of previous studies in the governmental accounting issues is

regarding the studies beyond the context of governmental accounting and reporting major

issues, which I consider as sub issues in the literature of governmental accounting and

reporting. For example, some studies introduce governmental accounting innovations in the

public sector of the governmental accounting modules as: stimuli, social, structural variables

about information users, structural variables describing the politico-administrative system,

and implementation barriers (Luder 1992), other studies focus on sub issues of accounting, as

accounting for bonds and bond issuers, regarding rating, pricing , disclosed information and

delayed reporting (e.g., Luder 1992; Gore 2004; Benson and Marks 2014; Callahan and

Waymire 2015; Henke and Maher 2016; Bloch et al. 2016). In addition, the housing value

relevance takes place in the literature, where previous studies suggest that local government

accounting data do capture housing value-relevant information and housing prices are

directly associated with the governments’ reported general fund surplus or deficit (Lin and

Raman 1998; Copley and Douthett 2014).

On the other hand, Vela and Fuentes (2000) reveal the necessity to develop further

research in international governmental accounting for that purpose of unifying governmental

accounting and reporting framework and structure. Also, there are several studies in the

context of governmental accounting and reporting beyond the major context (that have shown

various results), for example, the relevant differences between governmental accounting

system and national accounting system regarding the adopted principles (and the need for

convergence of both systems), governmental accounting for capital assets and their issues, the

relationship between education and governmental accounting as to increase the attention of

business schools to develop this field of learning and its major issues, purposed changes in

fund balance reporting, such as those enacted by governmental accounting system, and by the

governmental accounting standards board (GASB) and its relation with the generally

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accepted accounting principles (GAAP), the general reform in the preparation of

governmental financial statements and reports, and governmental auditing ( e.g, Jesus and

Jorge 2001; Christiaens and Vanhee 2003; Henry 2005; Carpenter et al. 2006; Gore 2012;

Oulasvirta 2014; Aversano and Christiaens 2014; Elder et al. 2015; Caruana 2017).

Based on the previous studies, my study is measuring the current situation for the

international governmental accounting and reporting models, which are expected to be

promising to develop the international systems to unify those models of high significance,

and accordingly contribute to the to the growth of international economies. Therefore, I

develop this paper’s hypothesis based on the witnessed governmental accounting issues

regarding the measurement and disclosure, and the surrounding deliberations affected by

various point of views. Thus, the hypothesis of this paper is as follow:

H1: There are at least one governmental accountings and reporting model adopted by

Countries’ governments, and contribute to the discriminant among those countries,

formed as: (i ≠ 0,,,,,,,, , for at least one i ).

RESEARCH DESIGN

Data

The data I use in this paper is based on my experiment of an attempt to find answers

to this paper’s question, whereas I started thinking of preparing a discriminant statement

similar to the questionnaire and distribute to a sample of practitioners (as to collect

responses), but in order to direct the paper to a more realistic method, I find a more

significant method by accessing the data of the top countries in the world having the highest

economic indications, and reported by their governments. As there are 195 countries currently

in the world, approximately 30% of them are the top 50 countries of the highest economic

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indications, subsequently I check the rank of these top 50 countries prepared by the

(International Monetary Fund (IMF), and direct the paper to collect and analyze the required

data for this paper.

The list of these countries and their governments are shown in table A(1) in the

appendix in a descending order, therefore the sources of the data required for analysis and

study are varying in accordance to each government’s style of disclosing their financial and

non-financial data. Thus, I arranged the sources of the data to be obtained from: (i)

downloaded government’s financial reports or annual reports in a form of PDF files, from

the website of the governments, (ii) ministries of finance of these governments, and (iii) the

results of researches regarding specific government’s performances and activities, and

regarding governmental accounting and reporting models. The time period of these data are

for the last couple of years, year 2017 for some governments and year 2016 for some other

governments.

Nevertheless, during this time period of my study, some countries do not disclose

their financial data in an understandable style, or do not follow the GAAP or IPSAS as other

countries do. Therefore, and based on the reachable data, I check for governmental

accounting and reporting models adopted by governments in each country under study, these

models are indicated by 8 categories. As a result, after reading and searching the sources of

the data, it can be understandable whether countries under study adopt any of these

governmental accounting and reporting models or not, these 8 models are: (i) governmental

accrual accounting model, (ii) governmental cash basis accounting model, (iii) governmental

mixed accounting model, (iv) governmental budgetary accounting model, (v) governmental

financial reporting model, (vi) governmental sustainability reporting model, (vii)

governmental integrated reporting model, and (viii) unclear for the types of governmental

sustainability and integrated reporting models.

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 In order to quantify the data, I assign 1 for each governmental accounting and

reporting model adopted by governments in each country under study, and I assign 0 for each

governmental accounting and reporting model not adopted by governments in each country

under study. Using the MINITAB statistical package, data are recorded to the discriminant

technique as to run the model appropriate to answer the paper’s question, in order to help

identify the most effective and postulated international perspective for governmental

accounting and reporting models. Moreover, it is significant to divide the top 50 countries

into two groups (group A and group B, each group presents 25 countries), mainly for the

purpose of comparison, where the two groups are noticeably (by me) are expected to differ in

the types of governmental accounting and reporting models adopted and can cause the

separation of such two groups, because whilst the assigning of the data to the governments of

the top 50 countries under study, it is obvious that the data for the group A are reachable from

any possible source of the data, whilst for group B (particularly the countries at the bottom of

the rank of this group) the data are not clear and are not easily reachable from the possible

sources, therefore a significant number of these governments in each of these countries are

assigned 0 for all the governmental accounting and reporting models under study, and

subsequently are not obvious whether these models are adopted or not (which is against the

disclosure accounting principle).

The Model

The model I design and can help answer the research question requires testing

whether the governmental accounting and reporting models are associated to the governments

of the top 50 countries or not, and helps identify the governmental accounting and reporting

models that contribute the most to the separation of group A and group B of the governments

in the 50 countries. Thus, I construct a multiple discriminant model taking into account all the

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statistical assumptions for running this following model and for identifying the discriminant

function as follows:

F= GACCUAM + GCABAM + GBUAM

GMIXAMGFINRMGSUSRM

GINTGRMUNCSUSINTGRM(1)


Where:

F = Top 50 governments of countries divided into group

A and group B (25 countries in each group).

GACCUAM = Governmental accrual accounting model.

GCABAM = Governmental cash basis accounting model.

GBUAM = Governmental budgetary accounting model.

GMIXAM = Governmental mixed accounting model.

GFINRM = Governmental financial reporting model.

GSUSRM = Governmental sustainability reporting model. 

GINTGRM = Governmental integrated reporting model.

UNCSUSINTGRM = Unclear for sustainability and integrated reporting

models.

To significantly measure the effect of adopting any of the 8 categories of

governmental accounting and reporting models on governments’ performance and postulated

international perspectives, the dependent variable (expressed as latent variable in the linear

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discriminant analysis) represents the top 50 governments for each country of the highest

economic and governmental indications, divided into group A and B, as it is expected that

this Top 50 governments are not all of the same style of disclosing and reporting

governmental accounting financial and non-financial information.

On the other hand, independent variables are expected to significantly help predict

and assure the separation of the top 50 governments of each country into two different

groups, and help identify the most influencing governmental accounting and reporting

models, which will contribute to the separation.

RESULTS

Table (1) displays information about descriptive statistics, which are significant for

measuring the differences among governments in group A and B of the top 50 countries in the

study, for the reason of making sure that there are significant group differences, otherwise

there will be additional considerations to take into account for this paper’s question and

hypothesis.

To this extent, descriptive statistics indicate variations between group A and group B,

as there is strong differences between the means of group A and group B, 0.4350 versus

0.2800 respectively, and the standard error of the mean is slightly different between group A

and group B, as the difference = 0.003, which represents the accuracy of both samples in

group A and group B as to conduct the analysis, also the SE of the mean = 0.0351 versus

0.0318 for group A and group B respectively, which is significantly low, indicating the

accuracy of the data as well.

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 Table (1)
(a )
Descriptive Statistics
n=200

Under Study Groups Mean SE Mean St. Dev. Variance

Group A of first top 0.4350 0.0351 0.4970 0.2470
25 governments
Group B of Second top 0.2800 0.0318 0.4501 0.2026
25 governments
(a)Test
of equal variances : Group A P – Value = 0.002 ( < 0.05 )
Group B P – Value = 0.964 ( > 0.05 )
As a result: Group A Significantly differs from Group B and initially accepting the hypothesis H1

Regarding the variation between group A and group B, the standard deviation shows a

difference between both groups and equals approximately 0.05, where the standard deviation

for group A is greater than it is for group B and equals 0.4970 versus 0.4501 respectively,

suggesting and assuring the separation of group A and B, and subsequently the variance of

group A and group B is significantly different as well, confirming the separations of the two

groups, where the variance equals 0.2470 for group A and 0.2026 for group B by

approximately a difference similar to the standard deviation difference.

In sum, descriptive statistics predict a group membership for A and B, suggesting the

separation due to the indications that show a significant difference. As a result, the initial

analysis shown by the descriptive statistics promote the usage of discriminant analysis to

measure how the 8 governmental accounting and reporting models (as independent variables)

contribute to the separation of group A and group B of top 50 countries, and in the meantime

show which governmental accounting and reporting models are significant to adopt in the

context of governmental accounting and reporting internationally.

Discriminant Analysis Results

To investigate the differences shown by descriptive statistics between group A and B,

the discriminant analysis drives the equation (1) as a linear combination of the 8

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governmental accounting and reporting models, that will discriminate best between the two

groups, for the purpose of generating the discriminant function. Table (2) reports the results

of running equation (1) using the MINITAB statistical package, as to result in the primarily

investigations of the discriminant function, which is the first step for the discriminant

analysis.

Table (2)
Primarily Investigations of Discriminant Function
Panel A: Summary of Classification
True Group
(a)
Probabilities of Classifying a Governmental Accounting &
Put into Group Reporting Model in the Group
(Independent Variables) 0.520
GBUAM 0.320
UNCSUSINTGRM 0.200
GMIXAM
(a)N=200 N correct = 51 Proportion (Probability) correct = 0.255
- GACCUAM is dropped, because it is included in the GMIXAM
- GCABAM has a zero probability.
- GFINRM has a zero probability.
- GSUSRM and GINTGRM have zero probability and are included in the category of UNCSUSINTGRM.

Panel B: Linear Discriminant Function for Groups

F= GACCUAM + GCABAM + GBUAM
GMIXAMGFINRMGSUSRM
(a)
GINTGRMUNCSUSINTGRM

Latent Variable F

Group A Group B
(b) (c)
Put into Group Linear Linear
Discriminant Function Discriminant Function
(Independent Variables)
GBUAM 5.7553 3.7082
GFINRM 4.9704 3.2138
GMIXAM 4.4469 2.9672
UNCSUSINTRM 3.9263 1.9744
Continued on the next page ,,,,,,,

20
 GSUSRM 2.0943 0.9867
GCABAM 1.0461 0.7240
GINTRM 0.5236 0.2467
GACCRUAM 0.0000 0.0000

(a)Latent variable F represents the LDF ( linear discriminant function)

(b&C) The descending order for discriminant function, from MINITAB results, as the group with the smallest squared
distance are shown on appendix Table A (2)

From table (2), panel A shows the summary of classification, as to identify the

probabilities of classifying a governmental accounting and reporting model to put into a

group, whereas the discriminant analysis mainly and correctly identified N correct = 51

governments from total N = 200 governments, and the probabilities of classifying at least one

of the governmental accounting and reporting models (the 8 independent variables) are listed

in a descending order.

As a result, the highest probability is identified for the GBUAM by 0.520, followed by

the UNSUSINTRM by the probability of 0.320, and for the last classified governmental

accounting and reporting model, it is identified for the GMIXAM by the probability of 0.200

as the lowest.

Consequently, the interpretation for the identified probabilities means that the

primarily investigation predicts that the expected governmental accounting and reporting

models to contribute to the separation of the group of governments into A and B are initially

identified by the GBUAM, as a reason because of the noticeable importance of budgeting

accounting model for all governments that disclose their budgets in a clear form, and work

for providing a reachable information source for all users of governmental and economical

21
information, for the purpose of presenting how these governments control their activities and

performance.

Also the separation is identified by UNCSUSINTRM, (which indicates the unclear

adoption of sustainability and integrated reporting by governments), where the recent

deliberations around sustainability issues and integrated reporting on the accounting and

reporting literature are still under study and are not yet applied by most of the governments,

probably because the major apparent activities and performance of governments should be

directed to serve the public and protect the environments, in addition to developing all

aspects required for the economic growth and the people’s wellbeing in their countries.

Moreover, the separation is identified by GMIXAM, because this model is adopted by

most of the governments in countries of the highest economic and reporting indications,

which occupy both cash basis accounting model and accrual basis accounting model, in

addition to historical cost and current market value accounting models, all mixed in one

accounting and reporting model.

In Panel B, the MINITAB runs the equation (1) for the linear discrimination function

for the two groups, where the results are displayed for the two groups A and B, results show

the linear discrimination function F for all governmental accounting and reporting models

(independents variables) in a descending order for each group. Using visual analysis, it is

obvious how the discriminant functions’ list of group A are greater than group B, which

initially indicate that the separation of group A is due to the prediction of equation (1) to the

governmental accounting and reporting models, that will contribute to the separation of this

group A from group B.

22
 As a result, group A is significantly affected by the adoption of governmental

accounting and reporting models more than group B, for group A, these models (in a

descending order) are: GBUAM on top of the list with F = 5.7553, followed by GFINRM with

F = 4.9704, then UNCSUSINRM with F = 3.9263, and in the bottom of the list are: GSUSRM,

GCABAM, GINTRM, and, GACCRUAM, with F = 2.0943, 1.0461, 0.5236 and 0.0000

respectively. This list reports the most influencing governmental accounting and reporting

model that are expected to contribute to governments separations.

Nevertheless, for more accurate results and decision analysis, table (3) shows the last

step for the linear discriminant analysis, which is the summary of misclassified observations.

It is obvious that the most influencing model (Independent variable) to put into group A and

contributes to the separation is the GBUAM, followed by GINTRM, UNCSUSINRM and

GMIXAM, with posterior probabilities equal 0.396, 0.247, 0.233, and 0.171 respectively, and

for GACCUAM, this model has no significant influence as its posterior probability = 0.001,

very near to zero.

On the other hand, the independent variables GFINRM, GSUSRM, and GCBAM are

not classified for any significant posterior probability, where GFINRM is included in the

GINTRM with 0.247 posterior probability, and GSUSRM is not clear, because it is also

included in the variable of UNCSUSINTRM along with GINTRM, regardless of the posterior

probability of this variable GINTRM which is 0.247. Moreover, GSUSRM is implicitly found

in the governments’ plans for serving the communities and protecting the environments.

Finally, GCBAM is not presenting any significant probability, as it is implicitly included in

the GMIXAM along with GACCUAM.

23
 Table (3)
(a) Summary of Misclassification Observations

Put into Group A

(Independent Variables) Squared Distance Posterior Probabilities
GBUAM 1.087 0.393
GINTRM 0.052 0.247
UNSUSINTRM 1.692 0.233
GMIXAM 4.731 0.171
(b)
GACCUAM 12.724 0.001

(a) This summary is identified based on the lowest squared distance in the entire classification and the related highest
posterior probabilities in the entire classification.
(b) This model GACCUAM is to exclude from the analysis for its posterior probability is very near to zero and equals
0.001

In sum, the most significant governmental accounting and reporting models to

contribute to the separation of group A of top 25 counties from group B of the second top 25

countries (50 top countries) are the governmental budgetary accounting model GBUAM,

followed by governmental integrated reporting model GINTRM, followed by the category of

unclear for sustainability and integrated reporting model UNSUSINTRM, and finally,

governmental mixed accounting model GMIXAM.

My results and analysis predict the equation (1) to be reduced into the following

equation:

F=  GBUAMGINTGRMUNCSUSINTGRMGMIXAM +

 (2)

From equation (2) it is applicable to predict the category to which governmental

accounting and reporting models belong to the postulated international perspective of

governmental accounting literature, and to predict any new cases to be classified in the same

manner.

24
 By then, the research question can be answered as: “the most effective governmental

accounting and reporting model to support the postulated international perspectives in this

regard are those shown in equation (2), and the H1 is reachable, as ( i ≠ 0 ,,, for at least one

i ), where i is the governmental accounting and reporting models used in the discriminant

analysis.

DISCUSSION& CONCLUSIONS

Governmental accounting and reporting literature discuss the needs of economies in

order to reform governments’ performances and activities. Thus international governmental

accounting standards need unifications as to increase transparency and accountability,

through the publication of high quality governmental integrated reporting, and for the

purpose of growing international economies.

The results of this paper indicate a discriminant approach to identify the most

significant governmental accounting and reporting models, expected to influence the top

governments of highest economic indications, through separating them based on the

predictions shown by the statistics of a linear discriminant function, which results in a final

descending list of probabilities predicting that: the governmental budgetary accounting

model, governmental integrated reporting model, the non-clarity of sustainability and

integrated reporting model, and finally the governmental mixed accounting model are the

major influences to cause the separation of the top 50 governments in this study. The results

also confirm the separation and prove that the effect of these models on the group A is more

than it is on group B in this total number of the top governments.

This paper contributes to the literature of governmental accounting and reporting by

highlighting how the variations in the governmental accounting principles to be adopted (for

example, GAAP, IFRS, IPSAS, Laws & Rules of countries) can negatively affect the

25
comparison and the investment decisions. Therefore, my recommendations can contribute to

motivating regulatory bodies to work on unifying the governmental accounting and reporting

principles for a better international transparency and full disclosure of governments.

This paper has limitations in regard to the difficulty of applying the results of this

paper on each country, where a significant number of countries do follow their own

governmental accounting and reporting rules and laws. As a consequence, there is no

regulatory body can impose unified governmental accounting and reporting principles and

rules until recent time.

My recommendations to the future research is to restudy my results and replicate the

sample of the countries in this study (in accordance to their economic indications to be

announced internationally in the future) for the purpose of following any reform occurring in

the context of governmental accounting and reporting issues, because from reforms and

models adopted, investors can understand how governments can best manage their activities

and benefit those investors and all other interested parties interested in the governmental

accounting and reporting information.

26
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 APPENDIX

Table A (1)
(a)
The Top 50 Countries Under Study

Group A: First Top 25 Countries Group B: Second Top 25 Countries

USA Thailand
China Austria
Japan Norway
Germany Iran
UK UAE
France Nigeria
India Irelan
Italy Israel
Brazil South Africa
Canda Denmark
Russia Malaysia
Korea Hong Kong
Spain Singapore
Australia Philippines
Mexico Culombia
Indonesia Pakistan
Netherlands Finland
Turkey Bangladesh
Saudi Arabia Chile
Switherland Egypt
Argentina Czerch
Poland Portgal
Taiwan Rommina
Sweden Vietnam
Belgium Peru
(a)Source: - https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal).
- (International Monetary Fund, 2017).

30
 Table A (2)

The MINITAB Results for:

The Smallest Squared Distance of Group A & B
Squared Distance Between Groups
Gov Fin
Accrual Budgetary Cash Base Reporting
Acc Model Acc Model Acc Model Model
Accrual Acc Model 0.00000 7.28958 0.25643 5.44873
(Continued on the next page),,

Budgetary Acc Model 7.28958 0.00000 4.81435 0.13373

Cash Base Acc Model 0.25643 4.81435 0.00000 3.34330
Gov Fin Reporting Model 5.44873 0.13373 3.34330 0.00000
Gov Integ Reprting Model 0.05175 6.12383 0.08144 4.44811
Gov Sust Reporting Model 0.82805 3.24762 0.17749 2.06727
Mixed Acc Model 4.44811 0.35061 2.56942 0.05175
Unclear for Sust & Integ Reporting 2.98760 0.99758 1.51375 0.41495

Gov Integ Gov Sust

Reprting Reporting Mixed Acc
Model Model Model
Accrual Acc Model 0.05175 0.82805 4.44811
Budgetary Acc Model 6.12383 3.24762 0.35061
Cash Base Acc Model 0.08144 0.17749 2.56942
Gov Fin Reporting Model 4.44811 2.06727 0.05175
Gov Integ Reprting Model 0.00000 0.46578 3.55099
Gov Sust Reporting Model 0.46578 0.00000 1.48067
Mixed Acc Model 3.55099 1.48067 0.00000
Unclear for Sust & Integ Reporting 2.25319 0.67100 0.20049

Unclear for
Sust & Integ
Reporting
Accrual Acc Model 2.98760
Budgetary Acc Model 0.99758
Cash Base Acc Model 1.51375
Gov Fin Reporting Model 0.41495
Gov Integ Reprting Model 2.25319
Gov Sust Reporting Model 0.67100
Mixed Acc Model 0.20049
Unclear for Sust & Integ Reporting 0.00000

31
 Chapter (2) : The Impact of the Changes in Governmental Accountability
on the Change in Governmental Revenues

Abstract: This paper shows how the changes in governmental accountability can impact the change in total
governmental revenues relying on analysing and studying the governmental financial reports. The paper uses
regression models to analyse this impact and show the empirical evidence. The findings show that the change in
accounting information of total assets and liabilities, social insurance expenditures, and accountability office
auditor’s report (as indicators of governmental accountability) are positively associated with the change in total
governmental revenues. This paper redevelops the need for future research to replicate my findings and expand
analysis and empirical evidence.
Keywords: governmental accountability, governmental revenues, and governmental
financial reports

I. INTRODUCTION & BACKGROUND

The role financial management in the governmental sector of various countries words

apart has evolved in order to meet the needs of citizens and interested parties from

governmental financial and nonfinancial information. Sululing et al. (2022) state that one of

the most important principles of governmental financial management is accountability and

transparency, which are highly necessary for the preparation of governmental financial

reports. Wolainin (2022) shows that among principles affecting the shape of governmental

financial management are the budgetary revenues and expenditures, which are significant to

consider how governmental financial reports could impact various aspects in countries keen

to prepare high quality governmental financial reports, in order to protect and manage public

money and discharge accountability (e.g., Evani et al. 2012) .

Indriasih (2014) shows that providing governmental information of a high-quality

financial reporting is important, because many people will rely on the information in the

financial statements published by the government as a basis for decision making. Duenya et

al. (2017) add that comprehensive governmental financial statements will serve as an

evaluating criteria for governmental performance. Gamayuni (2018) shows in accordance to

the governmental accounting principles, the purpose of governmental financial reporting is to

32
present information that is useful to users in assessing accountability and to make a good

decision making of economic, social, and politics decisions.

In addition, Al-Hashimia (2019) assures that governmental financial reports facilitate

the process of accountability to prevent corruption and protect the interests of the society.

Moreover, budgets control are central in planning, controlling, and accountability to make

sure that resources must be used to improve people’s welfare and to determine the actual state

of collected budget revenues and expenditures (e.g., Setyawan and Gamayuni 2020; Wolanin

2022).

As a result of the importance of governmental accountability, when evaluated by

interested parties and citizens, I predict in this study the impact of the changes in

governmental accountability on the change in the total governmental revenues as the most

important element in the governmental accounting and financing system, as to demonstrate

how citizens and interested parties can contribute to the changes in governmental revenues,

by being willing to pay taxes and fees, donate, and pay any other requirements by the

government, and accordingly, increase the total governmental revenues.

As a consequence, governments should improve its accountability and transparency,

by providing information of high quality in the governmental financial reporting and by

applying high quality governmental accounting standards, strengthening internal control and

auditing, as well as applying technologies to better present their financial reports in a high

quality useful form (e.g., Duenya et al. 2017; Al-Hashimia 2019; Agbenyo et al. 2018;

Setyawan and Gamayuni 2020; Jafaru and Francis 2016; Wisdom et al. 2017;

Hertati et al. 2019).

This paper’s main question is: “Is the changes in governmental accountability will

cause the change in the governmental revenues or not? In order to answer this question, I

identify in this study the expected variables that reflect the governmental accountability, as

33
the most significant financial indications as well as nonfinancial indications, whereas I

expect their positive impact on the change in the governmental revenues.

I use the governmental financial reports presented by the government of the United

States of America (USA) to obtain the data of the variables required for this study and to

answer the main question of this paper, whereas these reports are a source for high quality

financial and nonfinancial information compared with other international governmental

financial reports for most of the foreign countries. In accordance to this paper’s idea, the

proposed hypothesis of this paper is: (H1: there is an impact of the changes in governmental

accountability on the change in governmental revenues).

The remainder of this paper is organized as: section II shows the sample selection,

section III shows the empirical evidence and section IV shows the conclusions.

II. THE MODEL

Sample

I obtain the data required for the empirical results of this study from the official

website of the USA government ( https://www.fiscal.treasury.gov/reports-

statements/financial-report/previous-reports.html) , as I use the USA’s governmental

financial reports for the past 11 years (2011-2021). The governmental financial reports of the

USA government help use the data of financial information and nonfinancial information

required for this study during the period where the international developing of governmental

accounting standards had evolved. I use these governmental financial reports due to their high

quality on one hand, and due to the application of the governmental accounting standards set

by the governmental accounting standards board (GASB) in the USA on the other hand,

where the generally accepted accounting principles (GAAP) are applied.

34
Variable Significance

This paper focuses on finding a relation between the changes in the governmental

accountability and the change in the total governmental revenues in the USA, whereas this

relation will help answering this paper’s main question. I expect a positive relation between

many influencing variables of the change in governmental accountability and the change in

total governmental revenues. I predict this relation by using one dependent variable, which is

the change in total governmental revenue, and 9 independent variables showing the changes

in governmental accountability, as well as 5 dummy variables representing the governmental

accountability.

Dependent Variable

This paper predicts the impact on the changes in total governmental revenues of the

USA as the dependent variable, the variable is shown as  TGOVREV j,t in the regression

model for the selected governmental financial reports j for time t. Which is expected to

change by the changes in the USA governmental accountability, and indicating whether the

citizens and other interested parties are and will be willing to contribute to the change in total

governmental revenues or not, the changes are measured mathematically by calculating the

difference from year to another.

To my knowledge, there is no previous studies considering my paper’s idea. Figure (1)

panel A shows the growing of USA total governmental revenues, and panel B shows the

changes in such revenues, reflecting the importance of this accounting element that

encouraged preparing this study.

35
 Figure (1) Panel A:

Time Series Total Governmental Revenues Plot for the Data from

Year 2011 to Year 2021

Time Series Plot of T GOVREV j ,t

4500

4000
T GOVREV j ,t

3500

3000

2500

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Time

Panel B:

Time Series Change in Total Governmental Revenues  TGOVREV j,t Plot

for the Data from Year 2011 to Year 2021

Time Series Plot of the Change in TGOVREV j ,t

700

600
The Change in TGOVREV j, t

500

400

300

200

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Time

________________________________________________________________________________

36
Independent Variables

I measure the changes in the USA governmental accountability in relation to 9

independent variables and 5 dummy variables as to help find the empirical results of this

paper. The independent variables are selected from the USA governmental financial reports

for the period under study, and the changes are measured mathematically by calculating the

difference from year to another.

The selected 9 independent variables are : variable number one is the change in budget deficit

 BUDDEF j,t , reflecting how the government can maintain the health of the country,

variable number two is the change in net operating costs  NOPCOST j,t , reflecting the

ongoing expenses incurred by the government excluding any damages or grants, variable

number three is the change in total asset  TASSETS j,t , reflecting the efficiency of

governmental investments and projects necessary for serving the country, variable number

four is the change in total liabilities  TLIB j,t , reflecting the governmental obligations and

the sources of funds necessary for financing projects and developing the country, variable

number five is the change in social insurance expenditures  SINSUEXP j,t ,

reflecting the governmental spending for social security to the citizens and other bodies.

These variables from number one to number five reflect the accounting information that

express the importance of the changes in governmental accountability.

On the other hand, variables from number six till variable number 8 are reflecting the

economic information necessary for expressing the importance of the changes in

governmental accountability, which are : variable number six is the change in social

insurance net expenditures as a percentage of growth domestic product (GDP)

 NSINSU%GDP j,t , reflecting the governmental spending for social protection and social

programs. Variable number seven is the change in real growth domestic product (GDP)

 RGDPGRO j,t , reflecting the growth in the size of the workforce and growth in the

37
productivity of the country, variable number eight is the change in unemployment rate 

UNEMP j,t , reflecting the number of unemployment people as a percentage of the labor force

and the ability of the government to control this unemployment rate by an optimal

percentage. And finally, variable number nine is also an accounting information reflecting the

change in cash and other monetary assets  CASH&MONASST j,t , reflecting the liquidity and

the ability of the government to cover obligations and initiate more investments and projects

to serve the country.

This paper considers the impact of the changes in these independent variables , as indicators

to the USA governmental accountability, on the change in the USA total governmental

revenues, in order to present how citizens and other interested parties are willing or not to

contribute to such changes in the total governmental revenues (if they managed to evaluate

the government’s financial and nonfinancial performance).

Dummy Variables

In addition to the independent variables, I also predict the impact of 5 dummy

variables (indicating governmental accountability) on the change in total governmental

revenues in the USA. Dummy variable number one is the accountability office auditor’s

report  ACCAUDREP j,t , reflecting the auditor’s opinion regarding the governmental

financial statements and the application of GAAP in the USA governmental accounting

system, dummy variable number two is the social responsibility SORESP j,t , reflecting the

government contribution to the society, and the accountability towards the society, and how

to benefit the whole society , dummy variable number three is the government future

planning and projections FUPLAN&PRO j,t , reflecting the role of the government to benefit

the future generations and the whole country, dummy variable number four is the government

integrated reporting INTGREP j,t , reflecting how the government can optimally use its

strategy, governance, performance, and prospects in a way that reflects the commercial,

38
social, and environmental context within which it operates, and finally, dummy variable

number five is internal control INTCONTROL j,t , reflecting that governmental information

(financial and nonfinancial) are reliable, accurate, and timely, and reflect the government

compliance with applicable laws, regulations, contracts, policies, and procedures.

For each of these five dummy variables, I assign a weight of 1 for strengths and 0 for

weaknesses or not available. To my knowledge and search, there is no previous studies

concerning the impact of these dummy variables on the change in governmental revenues.

Models of the Impact of the Changes in Governmental Accountability

on the Change in Total Governmental Revenues

As a result of MINITAB statistical package rejection to run one regression model

including all the independent and dummy variables, I use in this paper two initial regression

models, one includes all the 9 independent variables and the another includes all the 5

dummy variables. Both models are to be run for the purpose of showing the most influencing

variables that impact the change in the total governmental revenues  TGOVREV j,t .

The two initial regression models are shown as follow:

Model (1)

 TGOVREV j,t BUDDEF j,t NOPCOST j,t

TASSETS j,t   TLIB j,t
SINSUEXP j,t NSINSU%GDP j,t
 RGDPGRO j,t  UNEMP j,t
 CASH&MONASST j,t  e t

(1)


Where:

Table A(1) panel (A) in the appendix shows the details of the dependent variable and

the independent variables of this regression model (1).

39
Model (2)

 TGOVREV j,t ACCAUDREP j,t SORESP j,t

FUPLAN&PRO j,t  INTGREP j,t
INTCONTROL j,t  e t

(2)

Where:

Table A(1) panel (B) in the appendix shows the details of the the dummy variables of

this regression model (2).

III. EMPIRICAL RESULTS

Descriptive Statistics

Table A (2) in the appendix presents the descriptive statistics of all the variables in

both models (1 &2) before any required analysis and tests for the data. Panel (A) in

table A (2) shows the descriptive statistics for dependent and independent variables in

regression model (1). Panel (B) in table A (2) shows the descriptive statistics for the variables

in regression model (2) which includes all the dummy variables. I analyse the results of the

descriptive statistics in the appendix below the table A (2) as to maintain the required

investigations and inferential statistics analysis.

Test of Normality

Visual analysis for the time series of the data for all the variables (dependent, independent

and dummy) shows for most of the data slight changes, negative changes, and low numbers,

which make it difficult to maintain the required statistical results when test of normality is

performed using Shapiro-Wilk test (W-Test) or Pearson correlation. I present in the appendix

table A (3) the results of Shapiro-Wilk test (W-Test) of normality applied to all the variables

in regression model (1) and (2).

Moreover, and as a result of the statistical analysis, transformation for the variables with W

calculated < W tabulated are rejected by the MINITAB statistical package due to the low and

40
negative numbers in the time series data for such variables, and due to maintaining no results

for W-test for most of the dummy variables. Therefore, I run directly the initial regression

models (1 &2) for all the data without transformation, as I focus on the significant statistical

results and indications of t-statistic.

Results of Running the Regression Model (1)

Table (1) shows the results of running the regression model (1), which includes all the

independent variables without the dummy variables.

Table (1)
Results from Running Regression Model (1)

 TGOVREV j,t BUDDEF j,t NOPCOST j,t TASSETS j,t  TLIB j,t
SINSUEXP j,t NSINSU%GDP j,t  RGDPGRO j,t
 UNEMP j,t  CASH&MONASST j,t  e t

Variable Name Coefficient SE. Coef. t-stat Pr

 -801.300 440.500 -1.82 0.320

 BUDDEF j,t -0.215 0.263 -0.82 0.564
 NOPCOST j,t 0.113 0.133 0.85 0.552
 TASSETS j,t 1.057 1.060 1.00 0.501
 TLIB j, 0.281 0.098 2.87 0.213
 SINSUEXP j,t 0.040 0.035 1.14 0.459
 NSINSU%GDP j,t -73756.000 24721.000 -2.98 0.206
 RGDPGRO j,t -18551.000 8517.000 -2.18 0.274
 UNEMP j,t 52935.000 30769.000 -1.72 0.335
 CASH&MONASST j,t, -1.177 0.776 -1.52 0.371
Notes : R2 = 0.98
S = 73.001

 TGOVREV j,t = the changes in the total governmental revenues

 BUDDEF j,t
 NOPCOST j,t
 TASSETS j,t
 TLIB j,t
 SINSUEXP j,t
 NSINSU%GDP j,t
 RGDPGRO j,t
 UNEMP j,t
 CASH&MONASST j,t
= the change in budget deficit
= the change in net operating costs
= the change in total assets
= the change in total liabilities
= the change in social insurance expenditures
= the change in social insurance net expenditures as a percentage
of growth domestic product (GDP)
= the change in real growth domestic product (GDP)
= the change in unemployment rate
= the change in cash and other monetary assets

From table (1) t-statistic for the two variables of the change in budget deficit

 BUDDEF j,tand the change in net operating cost  NOPCOST j,t is -0.82 and 0.85

respectively, and their Pr is 0.564 and 0.552 respectively. Therefore, the two variables have

low t-statistic and relatively high Pr, hence, they are nonsignificant to be included in the

41
regression model (1). As a result, and regardless of the high explanatory power of the

regression model indicated by R2 of 0.98, I exclude the two variables from the regression

model (1) and keep all the other variables with t-statistic higher than 1 in this regression

model in order to generate the following regression model (1/a):

 TGOVREV j,t TASSETS j,t   TLIB j,t SINSUEXP j,t

 NSINSU%GDP j,t  RGDPGRO j,t
 UNEMP j,t  CASH&MONASST j,t  e t

(1/a)
Table (2) shows the results of running regression model (1/a).

Table (2)
Results from Running Regression Model (1/a)

 TGOVREV j,t TASSETS j,t   TLIB j,t SINSUEXP j,t

 NSINSU%GDP j,t  RGDPGRO j,t
 UNEMP j,t  CASH&MONASST j,t  e t

Variable Name Coefficient SE. Coef. t-stat Pr

 -960.900 290.900 -3.30 0.046

 TASSETS j,t 1.533 0.660 2.33 0.103
 TLIB j, 0.232 0.064 3.61 0.037
 SINSUEXP j,t 0.057 0.022 2.56 0.083
 NSINSU%GDP j,t -67584.000 18960.000 -3.56 0.038
 RGDPGRO j,t -20055.000 5424.000 -3.70 0.034
 UNEMP j,t -65014.000 17311.000 -3.76 0.033
 CASH&MONASST j,t, -1.429 0.500 -2.86 0.065
Notes : R2 = 0.97
S = 58.106

 TGOVREV j,t = the changes in the total governmental revenues

 TASSETS j,t = the change in total assets
 TLIB j,t = the change in total liabilities
 SINSUEXP j,t = the change in social insurance expenditures
 NSINSU%GDP j,t = the change in social insurance net expenditures as a percentage
of growth domestic product (GDP)
 RGDPGRO j,t = the change in real growth domestic product (GDP)
 UNEMP j,t = the change in unemployment rate
 CASH&MONASST j,t = the change in cash and other monetary assets
_________________________________________________________________________________________

From table (2) it is apparent that the t-statistic for all the variables have improved,

indicating a significant impact on the change in governmaental revenues TGOVREV j,t .

Nevertheless, the explanatory power of the model (1) has slightly declined after excluding the

two variables of the change in budget deficit  BUDDEF j,tand the change in net operating

42
cost  NOPCOST j,t , where R2 has declined from 0.98 to 0.97, regardless of the

improvement in t -statistic for all the variables in the regression model (1/a).

Therefore, I test and run the regression model (2) to identify the most influencing

dummy variables that would impact the change in governmaental revenues TGOVREV j,t ,

for the purpose of including them into the regression model (1/a) and improve the model’s

explanatory power.

Results of Running the Regression Model (2)

Running regression model (2) (which include all the dummy variables in

this study) shows a very poor explanatory power. Moreover the MINITAB statistical package

removed the following dummy variables from the equation of regression model (2):

the social responsibility SORESP j,t , the government future planning and projections

FUPLAN&PRO j,t , the government integrated reporting INTGREP j,t , and the internal

control INTCONTROL j,t , as a result of the data’s statistical problems and their nonsignificant

impact on the change in total governmental revenues. Only the dummy variable of the

accountability office auditor’s report ACCAUDREP j,t remains in the regression model (2)

with a very low R2 of 0.003, and low t-statistic of -0.15 with very high Pr 0.884, assuring the

nonsignificant impact of the other dummy variables to rely on in this study.

Nevertheless, and for the purpose of improving the explanatory power of regression

model (1/a), I include this dummy variable of the accountability office auditor’s report

ACCAUDREP j,t into the regression model (1/a). Subsequently, regression model (3) is

generated as the final and main regression model to rely on for answering this paper’s main

question and to test the hypothesis H1 . The model is shown as follow:

 TGOVREV j,t TASSETS j,t   TLIB j,t SINSUEXP j,t

 NSINSU%GDP j,t  RGDPGRO j,t
 UNEMP j,t  CASH&MONASST j,t
 ACCAUDREP j,t e t

(3)

43
Results of Running the Final and Main Regression Model (3)

Table (3) shows the results of running the final and main regression model (3), which

includes the independent variables of regression model (1/a) and the only dummy variable

remaining in the equation of regression model (2).

I keep this final regression model without any further decomposition, because, if the model is

decomposed, its explanatory power will decline and the less significance will be apparent.

Table (3)
Results from Running the Final and Main Regression Model (3)

 TGOVREV j,t TASSETS j,t   TLIB j,t SINSUEXP j,t

 NSINSU%GDP j,t  RGDPGRO j,t
 UNEMP j,t  CASH&MONASST j,t 
 ACCAUDREP j,t e t

Variable Name Coefficient SE. Coef. t-stat Pr

 -632.600 264.000 -2.40 0.139

 TASSETS j,t 1.110 0.513 2.16 0.163
 TLIB j, 0.163 0.057 2.85 0.104
 SINSUEXP j,t 0.050 0.016 3.07 0.092
 NSINSU%GDP j,t -97310.000 20084.000 -4.85 0.040
 RGDPGRO j,t -15032.000 4598.000 -3.27 0.082
 UNEMP j,t -40634.000 17332.000 -2.34 0.144
 CASH&MONASST j,t, -1.324 0.359 -3.69 0.066
ACCAUDREP j,t 207.200 104.000 1.99 0.185
Notes : R2 = 0.99
S = 41.20
+-
 TGOVREV j,t = the changes in the total governmental revenues
 TASSETS j,t = the change in total assets
 TLIB j,t = the change in total liabilities
 SINSUEXP j,t = the change in social insurance expenditures
 NSINSU%GDP j,t = the change in social insurance net expenditures as a percentage
of growth domestic product (GDP)
 RGDPGRO j,t = the change in real growth domestic product (GDP)
 UNEMP j,t = the change in unemployment rate
 CASH&MONASST j,t = the change in cash and other monetary assets
ACCAUDREP j,t = the accountability office auditor’s report
_______________________________________

For the purpose of this paper’s hypothesis, results in table (3) indicate that (for the

USA government) the change in total assets, the change in total liabilities, the change in

social insurance expenditures, and accountability office auditor’s report are positively

associated with the change in total USA governmental revenues (t = 2.16, Pr = 0.163), (t =

44
2.85, Pr = 0.104), (t = 3.07, Pr = 0.092) and (t = 1.99, Pr = 0.185). The other significant

variables in the final regression model which are: the change in net social insurance

percentage to GDP, the change in real GDP growth, the change in unemployment rate, and

the change in cash and monetary assets are negatively associated with the change in total

USA governmental revenues (t = -4.85, Pr = 0.040), (t = 3.27, Pr = 0.082), (t = -2.34, Pr =

0.144) and (t = -3.69, Pr = 0.066).

Therefore, interpreting these results of the final regression model presents how

citizens and other interested parties in the USA can judge and evaluate the government

through its governmental financial reports, as they focus on the change in the understudy

accounting information (financial and nonfinancial) rather than the change in the understudy

economic information. As a consequence, results indicate the significance of change in total

assets and total liabilities, the change in social insurance expenditure and the accountability

office auditor’s report as accounting information that lead citizens and other interested parties

to contribute to the change in USA governmental revenues (which show an upward trend for

the period under study from year 2011 till 2021).

On the other hand, economic information of: change in net social insurance as a

percentage of GDP, the change in real GDP growth and the change in unemployment rate are

nonsignificant economic information citizens and interested parties focus on. Thus, the

results indicate their negative impact on the USA change in governmental revenues.

Results also indicate a negative impact of the change in cash and monetary assets (as an

accounting information) on the USA governmental revenues, where I interpret this

observation based on the fact that citizens and interested parties are focusing more on the

governmental activities and governmental usage of accrual accounting in the governmental

accounting system, which lead to reducing the impact of cash and monetary assets on the

change in on total governmental revenues.

45
Finally, the results support the H1 hypothesis of this paper, as there is an impact of the

changes in the governmental accountability on the change in total governmental revenues.

IV. CONCLUSIONS

This study provides empirical evidence for how the changes in the governmental

accountability can impact the changes in the total governmental revenues, whereas results

indicate a positive association of the change in governmental total assets and total liabilities

as well as the change in social insurance expenditures (as accounting financial information)

with the change in total governmental revenues, in addition to the association of the

accountability office auditor’s report (as nonfinancial accounting information) with the

change in total governmental revenues.

My findings are derived from the study and analysis of the USA governmental financial

reports. These findings indicate my point of view in regards to the willingness of citizens and

other interested parties to contribute to the change in total governmental revenues

(particularly the increase in such governmental revenues) by their integrity to pay taxes and

fees and make donations and paying any governmental requirements, if they manged to judge

and evaluate the performance of the government through the analysis and study of the

government’s financial reports.

This paper provides a vision in regards to the most influencing variables reflecting

governmental accountability, that would impact the total governmental revenues. Thus, future

research can apply the same idea of this paper to countries other than the USA, if such

future research manged to reach to high quality governmental financial reports following the

GAAP, and search for more influencing accountability variables that would impact the total

governmental revenues.

46
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47
 APPENDIX

Table A (1)
The details of the variables of Regression (1 & 2)

Panel (A) : The details of the dependent and independent variables of Regression (1)

 TGOVREV j,t
 BUDDEF j,t
 NOPCOST j,t
 TASSETS j,t
 TLIB j,t
 SINSUEXP j,t
 NSINSU%GDP j,t
 RGDPGRO j,t
 UNEMP j,t
 CASH&MONASST j,t
= the changes in the total governmental revenues of the USA
at time t.
= the change in budget deficit at time t, reflecting how the
USA government can maintain the health of the country.
= the change in net operating costs at time t, reflecting the
Ongoing expenses incurred by the USA government
excluding any damages or grants.
= the change in total assets at time t, reflecting the efficiency
of USA governmental investments and projects necessary for
serving the country.
= the change in total liabilities at time t, reflecting the USA
governmental obligations and sources of funds necessary for
financing projects and developing the country.
= the change in social insurance expenditures at time t, reflecting
the USA governmental spending for social security to the
citizens and other bodies.
= the change in social insurance net expenditures as a percentage
of growth domestic product (GDP) at time t, reflecting the USA
governmental spending for social protection social programs
and purposes.
= the change in real growth domestic product (GDP) at time t,
reflecting the growth in the size of the workforce and growth in
the productivity of the USA country.
= the change in unemployment rate at time t, reflecting the
number of unemployment people as a percentage of the labor
force and the ability of the USA government to control this
unemployment rate by an optimal percentage.
= the change in cash and other monetary assets at time t,
reflecting the liquidity and the ability of the USA government
to cover obligations and initiate more investments and projects
to serve the country.

Panel (B) : The details of the dummy variables of Regression (2)

ACCAUDREP j,t = the accountability office auditor’s report at time t, reflecting the
auditor’s opinion regarding the USA governmental financial
statements and the application of GAAP.
SORESP j,t = the social responsibility at time t, reflecting the USA government
contribution to and accountability towards the society and how to
benefit the whole society.
FUPLAN&PRO j,t = the government future planning and projections at time t, reflecting
the role o the USA government to benefit the future generations
and the whole country.

Continued on the next page ,,,,,,,

48
 INTGREP j,t = the government integrated reporting at time t, reflecting how the
USA government can optimally use its strategy, governance,
performance, and prospects in a way that reflects the commercial,
social, and environmental context within which it operates.
INTCONTROL j,t = the internal control, reflecting the USA governmental information
Financial and nonfinancial are reliable, accurate, and timely, and
reflect the government compliance with applicable laws,
regulations, contracts, policies, and procedures.

Table A (2)

Sample Statistics
Descriptive Statistics (11 Governmental Financial Reports) (2011 – 2021)
(Dependent & Independent Variables Changes and Dummy Variables)

Variable Mean Std.Dev. Median Minimum Maximum


Panel (A): Dependent and independent variables for regression model (1)

 TGOVREV j,t 185.400 205.500 154.400 -49.400 684.300

 BUDDEF j,t 135.000 698.000 5.000 -409.000 2148.000
 NOPCOST j,t 92.000 862.000 2.000 -768.000 2384.000
 TASSETS j,t 183.000 701.000 155.000 -1057.000 1959.000
 TLIB j, 1675.000 1415.000 1311.000 686.000 5799.000
 SINSUEXP j,t 4595.000 1995.000 5300.000 1577.000 6900.000
 NSINSU%GDP j,t 0.001 0.002 0.001 -0.002 0.003
 RGDPGRO j,t 0.001 0.030 -0.005 -0.049 0.077
 UNEMP j,t 0.004 0.018 -0.006 -0.031 0.043
 CASH&MONASST j,t,  4.000 653.000 29.000 -1452.000 1402.000

Panel (B): Dummy variables for regression model (2)

ACCAUDREP j,t 0.091 0.302 0.000 0.000 1.000

SORESP j,t 1.000 0.000 1.000 1.000 1.000
FUPLAN&PRO j,t 1.000 0.000 1.000 1.000 1.000
INTGREP j,t 1.000 0.000 1.000 1.000 1.000
INTCONTROL j,t 0.091 0.302 0.000 0.000 1.000

 TGOVREV j,t = the changes in the total governmental revenues

 BUDDEF j,t
 NOPCOST j,t
 TASSETS j,t
 TLIB j,t
 SINSUEXP j,t
 NSINSU%GDP j,t
 RGDPGRO j,t
 UNEMP j,t
 CASH&MONASST j,t
ACCAUDREP j,t
SORESP j,t
FUPLAN&PRO j,t
INTGREP j,t
INTCONTROL j,t
= the change in budget deficit
= the change in net operating costs
= the change in total assets
= the change in total liabilities
= the change in social insurance expenditures
= the change in social insurance net expenditures as a percentage
of growth domestic product (GDP)
= the change in real growth domestic product (GDP)
= the change in unemployment
= the change in cash and other monetary assets
= the accountability office auditor’s report
= the social responsibility
= the government future planning and projections
= the government integrated reporting
= the internal control

Note: Dollars in Billions

49
Analysis of Descriptive Statistics:

Panel (A): Dependent and Independent Variables for Regression Model (1)
Table A (2) shows in billions that the mean (median) number for the change in total
governmental revenues of the USA is $185.4 ($154.4), with standard deviation of $205.5, where the
minimum number of the change is -$49.4 and the maximum number is $684.3, which indicate a
significant variation to take into account, and the necessity to perform more analysis and assurance
while considering the question of this paper. The main (median) of the change in budget deficit is
$134 ($5), with standard deviation of $698, and minimum number of the change is -$409 and the
maximum number is $2148, indicating a significant change to consider its potential impact on the
change in the governmental revenues of the USA as to reflect the health of the country. The mean
(median) of the change in net operating cost is $92 ($2), with standard deviation of $862 and
minimum number of -$768 and maximum number is $2384, showing a significant change to consider
its impact on governmental revenues change and growing based on the ongoing expenses incurred by
the government. The mean (median) of the change in total assets is $183 ($155), with standard
deviation of $701 and minimum number of the change -$1057 and the maximum number is $1959,
indicating a considerable significant change in the government investments and projects and their
impact on the change in governmental revenues. The mean (median) of the change in total liabilities
is $1675 ($1311), with standard deviation of $1415, and minimum number of the change is $686 and
the maximum number is $5799, showing a level of significance to the obligations required to develop
the country and their impact on the change in the governmental revenues. The mean (median) of the
change in social insurance expenses is $4595 ($5300), with standard deviation of $1995 and minimum
number of $1577 and maximum number of $6900, showing a significant impact of social security on
the change in governmental revenues. The mean (median) of the change in net social insurance
percentage to GDP is $0.001 ($0.001), with standard deviation of $0.002 and minimum number of
$0.002 and maximum number of $0.003. Although the changes and the numbers are slight, it is
expected that governmental spending on the social protection and programs will contribute to the
change in governmental revenues. The mean (median) of the change in real GDP growth is $0.001 (-
$0.005), with standard deviation of $0.030 and minimum number of -$0.049 and maximum number
$0.077. Despite the slight changes and numbers, growth in the size of workforce and growth in
productivity of the country should impact the change in governmental revenues. The mean and
median of the change in the unemployment rate is $0.004 (-$0.006), with standard deviation of $0.018
and minimum number is -$0.043, indicating a slight changes and low numbers, and should impact the
governmental revenues regardless of such slight changes and low numbers, and due to the impact of
the government ability to control the unemployment rate. The mean and median of the change in cash
and monetary assets is $4 ($25), with standard deviation of $653 and minimum number of -$1452 and
maximum number of $1402, indicating a significant changes that should impact the changes in
governmental revenues, and due to the significance of liquidity and government ability to cover
obligations.

Panel (B): Dummy Variables for Regression Model (2)

The descriptive statistics of all the dummy variables of the accountability office auditor’s report,
social responsibility, government future planning and projections, government integrated reporting
and internal control are showing slight changes and statistical stationarity, and low numbers (either 0
or 1). I expect the impact of these dummy variables on the governmental revenues to be significant, as
they are all reflecting the strengths or weakness of the governmental accountability.

50
 Table A (3)
Results of the Shapiro-Walk (W test) for Normality
for Regression Model (1 &2)

Variables W calculated
 TGOVREV j,t 0.929
 BUDDEF j,t 0.774
 NOPCOST j,t 0.875
 TASSETS j,t 0.852
 TLIB j, 0.746
 SINSUEXP j,t 0.950
 NSINSU%GDP j,t 0.994
 RGDPGRO j,t 0.889
 UNEMP j,t 0.846
 CASH&MONASST j,t 0.869
Dummy
ACCAUDREP j,t 1.000
SORESP j,t No result
FUPLAN&PRO j,t No result
INTGREP j,t No result
INTCONTROL j,t 1.000

W tabulated = 0. 876,,,,,,,, Significance Level 0.10

& Transformation is required for variables with: (W calculated < W tabulated )

51
 Chapter (3) : Extending Dimensions of Forensic Accounting and the
Organizations’ Strategies and Accountability: A Governmental Perspective

Abstract: The objective of this paper is to present the impact of extending the dimensions of forensic
accounting by percentages of influence, in order to overcome negative aspects in the governmental sector, for
the purpose of improving the governmental organizations’ strategies and accountability. I construct the
hypothesis for this paper based on this potential impact. Thus, I use an approach for the expected value and
variance of random variable test in order to analyze this potential impact. Then, I support the examination by
discrete probability distribution and continuous probability distribution. I find a probability of 82.9% to have a
significant potential impact of 67.1 % influence on improving the strategies and accountability of the
governmental organizations, which in turn, helps contribute to the economy growth, reduce corruption and
improve organizational behaviors.

Key Terms: forensic accounting, organization strategies, accountability, governmental sector, internal control

I. INTRODUCTION

Forensic accounting tends to cope with issues in regard to fraud, corruption, abuse, or

financial statements fraud cases, particularly in sectors that affect the economies and

workplaces in a negatively and damagingly ways, whether in for profit organizations or not

for profit organization. It is regulated by regulatory bodies like the international institute of

certified forensic accountants IICFA, the forensic and litigation advisory service FLAS, and

the American institute of certified public accountants AICPA. And performed by a certified

fraud examiner, and documented by the auditors’ report of accountability.

Research in this area is limited somehow, and focuses heavily on the private sector

rather than the governmental sector. The major coverage goes to technical skills of

accounting, auditing, finance, quantitative methods and some areas of law and regulations, as

well as behaviours and ethics in the workplaces and economies. To my knowledge and

search, the motive to conduct the forensic accounting is related to any suggestion that

something may not be right, and red flags are indicating a sign of misconduct or financial

fraud that require investigations in a manner that is considered legal and evidenced.

On the other hand, accountability is vital to evaluate in all types of firms in the public

sector, governmental sector, or private sector. Therefore, forensic accounting is to focus on

52
investigating the indications that warrant the accountability and protects the economy and the

public interests. Accountability can be evaluated by continuously testing and monitoring the

internal control system for organizations in regard to financial accounting, cost accounting,

governmental accounting, financial management, organizational behaviour, and all aspects

related to those in charge as the chief executive officer, mangers, employees, and workers.

Forensic accounting is still understudying area in the accounting literature, and needs

empirical expansion in order to contribute to the empirical research. The American

accounting association AAA is issuing the journal of forensic accounting research to cover

the up-to-date research ideas through its digital library. The magnitude of the research is in

the area of financial accounting and auditing as far as I read.

The outcomes of the forensic accounting system in practice are considered significant

for monitoring the internal control in the organizations in the private sector, and more

significant in the public and governmental sector, as it should be dependent on evaluating the

accountability, as well as the internal control.

In this paper, and in my view, I expect forensic accounting to extend its dimensions to

areas more significant, in addition to what it covers through its mission, particularly in the

governmental sector that might be affected by sort of corruption’s aspects, whether obvious

or unobvious to the internal governmental officers or the external interested parties interested

in the governmental performance.

I present this view of mine in a form of probability approach to show and express the

percentage of influence regarding negative aspects that would drive the regulatory parties to

extend the dimensions of forensic accounting to cover such influencing aspects, and work on

avoiding or overcoming it. The results suggest for governments to work on projects to

enhance the governance process and the forensic accounting focus, for the purpose of

protecting the economy and the governmental financial and nonfinancial performance.

53
 The hypothesis H1 for this paper is depending on my expectation that the probable

negative aspects in the governmental sector, when measured, indicate the necessity to

enhance the focus of forensic accounting, in order to improve the governmental

organizations’ strategies and accountability. The remaining of this paper is organized as

follow: section II presents the methodology and the presenting data, followed by section III to

present the results, and section IV presents the conclusions.

I. METHODOLOGY
In this study I present the demand to extend the dimensions of forensic accounting in

a probability format in order to potentially improve the organizations’ strategies and

accountability, for the governmental sector in particular. My estimations are set based on the

papers’ hypothesis H1 for the necessity to enhance the forensic accounting in the

governmental sector, as well as the governmental organizations’ strategies and accountability.

Presenting Data
Data of this paper are estimated based on my observations, conclusions, interviews,

discussions, searching and readings in the area of forensic accounting, and the organizational

behaviors’ practical issues. I sit the data based on the influence percentage of extending the

dimensions of forensic accounting on improving the governmental organizations’ strategies

and accountability (x).

Thus, I assign the influence percentages of extending forensic accounting for 7 major

estimations ranging from 0 to 100%, as, 0%, 10%, 20%, 40%, 60%, 80% and 100%.

Subsequently, I sit and study the expected number of variables ( n ) to be overcame in order

to improve the governmental organizations’ strategies and accountability. The influence

percentages are estimated based on observations, interviews, discussions, searching and

readings, these expected number of variables ( n ) are estimated to be 21 significant variables

related to nonfinancial aspects and financial aspects as well, and negatively affecting the

governmental organizations’ strategies and accountability.

54
 To my conclusions, I find aspects in regard to: officers slack, officers accepting and

doing favors, officers unfairness, officers self-interest, officers accepting commissions,

officers egos, officers greed, officers gossip, officers manipulations, officers pretending,

officers acting, officers mistrust, officers mental health, officers irresponsibility, organization

financial failure, organization lack of maintenance, organization lack of replacement

decisions, organization useless projects, organization inaccurate budgets, organization

unqualified officers, organization doing for pride, that all must be considered to extend the

dimensions of forensic accounting in order to improve the governmental organizations’

strategies and accountability by overcoming these negative aspects.

To that extend, I estimate the influence percentage of the 21 variables negatively

affecting governmental organizations to be as: with overcoming zero variable there is a

P ( x ) = 0.00 probability of contribution to the improvement of governmental organizations’

strategies and accountability by 0% , with overcoming 1 variable there is P ( x ) = 0.048

probability of contribution to the improvement of governmental organizations’ strategies and

accountability by 10%, with overcoming 2 variables there is P ( x ) = 0.095 probability of

contribution to the improvement of governmental organizations’ strategies and accountability

by 20%, with overcoming 3 variable there is P ( x ) = 0.143 probability of contribution to the

improvement of governmental organizations’ strategies and accountability by 40%, with

overcoming 4 variable there is P ( x ) = 0.190 probability of contribution to the improvement

of governmental organizations’ strategies and accountability by 60% , with overcoming 5

variable there is P ( x ) = 0.238 probability of contribution to the improvement of

governmental organizations’ strategies and accountability by 80%, and with overcoming

6 variable there is P ( x ) = 0.286 probability of contribution to the improvement of

governmental organizations’ strategies and accountability by 100%.

55
 Table (1) presents the sample observations for the influence percentages ( x ), and the

probability distribution P ( x ), based on the estimations of expected number of variables ( n )

to overcome in order to contribute to the improvement of governmental organizations’

strategies and accountability.

Table (1)
Sample Observations by the Influence Percentage of Extending Forensic Accounting for the
Governmental Sector & the Probability Distribution

The Influence Percentage of Expected Number of

Extending Forensic Variables to overcome&
Accounting on Improving Contribute to the Improving
Governmental Governmental
Organizations’ Strategies & Organizations’ Strategies &
Accountability. Accountability (*) The Probability Distribution
(x) (n) P(x)
0% 0 0.000
10% 1 0.048
20% 2 0.095
40% 3 0.143
60% 4 0.190
80% 5 0.238
100% 6 0.286
21 1.00

(*) ( n ) :
Stands for expected variables of: officers slack, officers accepting and doing favors, officers unfairness,
officers self-interest, officers accepting commissions, officers egos, officers greed, officers gossip, officers
manipulations, officers pretending, officers acting, officers mistrust, officers mental health, officers
irresponsibility, organization financial failure, organization lack of maintenance, organization lack of
replacement decisions, organization useless projects, organization inaccurate budgets, organization
unqualified officers, organization doing for pride

56
The Model:

To predict the impact of the influence percentages of extending the dimensions of

forensic accounting on overcoming negative aspects and improve the governmental

organizations’ strategies and accountability, I examine the expected value of the percentage

of influence ( x ) for a probability distribution for the sample of the associated variables ( n )

related to nonfinancial and financial aspects, and based on the estimation to their

probabilities.

Subsequently, I use the MINITAB statistical package, to run the expected value and

variance of random variables test in order to analyze the potential impact of the influence

percentages of extending the dimensions of forensic accounting, and then I support this

examination by discrete probability distribution and continuous probability distribution. This

model takes the following formats:

E ( x ) =  x P ( x ) …….. (1)

Where:

E ( x ) = the expected value of the influence percentages of extending the dimensions

of forensic accounting to improve the governmental organizations’

strategies and accountability

=  ( The mean )

x = the influence percentages of extending the dimensions of forensic accounting

P ( x ) = The probability distribution of ( x )

Var ( x ) = x P ( x )……… (2)

Where:

Var ( x ) = the variance summary of the variability in ( x )

x = the influence percentages of extending the dimensions of forensic

57
 accounting.

 = the mean

P(x) = The probability distribution of ( x )

II. RESULTS
Table (2) shows the results of the expected value of the influence percentage of

extending forensic accounting ( x ). The table shows the calculations as the expected value

of ( x ) = ( x ) P ( x ) = 67.1 %, as the influence percentage of extending forensic

accounting on improving governmental organizations’ strategies and accountability.

Therefore, I can initially predict that 67.1% to be the influence percentage of

extending forensic accounting on improving governmental organizations’ strategies and

accountability. Thus, over the time and by the development of forensic accounting, the

influence percentage of extending forensic accounting can be predicted using the 67.1%

expected value and to predict the average number of variables ( n ) that would be overcame

and contribute to improving governmental organizations’ strategies and accountability.

Thus, as I estimate the 21 variables ( n ) , so, ( 21 × 67.1 % ) = 14 variables

approximately, and can be predicted as to be overcame and help contribute to improving

governmental organizations’ strategies and accountability, and their importance can be ranked

based on the highest probability in the probability distribution.

Table (2) also shows the variability summarized by the variance Var (x) which =

1197.2 to indicate how far a particular influence percentage of extending forensic accounting

from the expected value Ex ( x ), and in this regard it is 1197.2 – 67.1 = 1130 and the

standard deviation = 34.60, indicating some variability and significant prediction for the

impact of influence percentages of forensic accounting .

58
 Table (2)
Results of Expected Value of the Influence Percentages of
Extending the Dimensions of Forensic Accounting

Ex (x) [x-Ex(x)]2
=  × Std.
2
x P (x) xP(x) ( x ) P ( x ) x-Ex(x) [x-Ex(x)] P(x) Var (x) Dev.

0% 0.000 0.00 67.1% -67.1 4502.41 0.00 1197.2 34.60

10% 0.048 0.48 -57.1 3260.41 155.26
20% 0.095 1.90 -47.1 2218.41 211.28
40% 0.143 5.71 -27.1 734.41 104.92
60% 0.190 11.43 -7.1 50.41 9.60
80% 0.238 19.05 12.9 166.41 39.62
100% 0.286 28.57 32.9 1082.41 309.26

Figure (1) shows the normal probability distribution for the influence percentages of

extending forensic accounting, as it is optimal to have the influence percentage of extending

forensic accounting 100% with the Ex ( x ) = 67.1% and standard deviation = 34.60, where it

shows the expected influence percentage of extending forensic accounting for each

percentage in the range of 0%, 10%, 20%, 40% , 60%, 80%, and 100%.

Figure (1)
The Normal Probability Distribution for The Influence Percentages of
Extending Forensic Accounting

Distribution Plot
Normal, Mean=67.1, StDev=34.6
0.012

0.010

0.008
Density

0.006

0.004

0.002
0.05
0.000
67.1 124.0
Influence percentage of extending forensic accounting (X)

______________________
The normal probability distribution for the influence percentages of extending forensic accounting, as it is optimal to have the
percentage of 100% with the Ex ( x ) = 67.1% and standard deviation = 34.60 , where it shows the expected influence percentages of
extending forensic accounting for each percentage in the range of 0%, 10%, 20%, 40% , 60%, 80%, and 100%.

59
 The MINITAB shows the normal probability distribution as the area of
P ( x < = 100%) = 0.829 and the shaded area on the scale = 0.05. Table (3) shows the
overall normal probability distribution as an indication for the highest probability of influence
percentages of extending forensic accounting.

Table (3)

The Overall Normal Probability Distribution for the Influence Percentages

of Extending the Forensic Accounting

The Influence Percentage of Extending Forensic

Accounting on Improving Governmental
Organizations’ Strategies & Accountability The Normal Probability Distribution
(x) P(x)
0% 0.026
10% 0.049
20% 0.080
40% 0.216
60% 0.419
80% 0.645
100% 0.829
to be 67.1% of influence

Therefore, continuous probability distribution also assure and confirm the influence

percentage of extending the dimensions of forensic accounting, as the results show that

P ( x < = 100) = 0.829 , which is identical to the normal probability distribution at percentage

of the 100% influence.

This paper results are supportive to the expected influence percentage of extending

forensic accounting on improving governmental organizations’ strategies and accountability,

as it is potential that 0.829 is the probability of the influence percentage of extending forensic

accounting by 100% to help attain the H1 of this paper.

Thus, extending the dimensions of forensic accounting can be interpreted by the

significant impact, which , this perspective, is expected to help contribute to the

60
improvement of governmental organizations’ strategies and accountability, and is encouraged

by the majority of governmental accountable officers and economic regulatory parties in the

international economy and governmental organizations of high quality organizational

behaviors and values for the purpose of attaining the required accountability.

III. CONCLUSIONS
I show my point of view in this paper by presenting the expected influence

percentages of extending the forensic accounting on improving the governmental

organizations’ strategies and accountability. I present the importance of this paper in the

necessity for forensic accounting to be extended in order to cover more negative nonfinancial

and financial aspects, particularly in the governmental organizations and their organizational

behaviors.

I show a sample of 21 negative aspects for forensic accounting to focus on and extend

to, and are used for the probability analysis, whereas overcoming them will improve the

strategies and accountability for the governmental organizations. I find an empirical

evidence, based on my presented point of view, that 0.829 is the highest probability for the

potential impact, that influence percentage of extending forensic accounting by 67.1% will

improve the strategies and accountability of the governmental organizations, and support the

hypothesis of this this paper and its perspective.

In this paper I find the appropriate method to examine my hypothesis is by using the

expected value and the variance tests for analysis, followed by a confirmation test, as I use

more probability analysis for more confirmation to my expectations, I also find additional

measure to support and confirm the paper’s perspective. The outcomes of this paper lead to

the expected impact of extending the dimensions of forensic accounting to affect and improve

the governmental organizations’ strategies and accountability.

My analysis is based on rational estimations for the probability distribution, that this

perspective will have a significant impact based on the necessity for extending the

61
dimensions of forensic accounting as to include more aspects and improve the strategies and

accountability in the governmental organizations, and overcoming problematic negative

aspect resulted from and raised by governmental organizations issues and their behaviors

issues.

Nevertheless, results show only 14 variables of the negative aspects are expected to be

overcame from the total of 21 variables, because the magnitude of the variables are related to

human behaviors, which have become a challenge to control in all types of organizations.

Future empirical research could attempt to restudy my findings in a different manner

for the expected variables to be associated to the future studies, and their numbers to measure

and predict the probabilities of their impact on the influence percentages of extending the

dimensions of forensic accounting.

Future researches also can encompass the appropriate prediction analysis and methods

to predict the influence percentages, and consequently, the impact on improving

governmental organizations’ strategies and accountability. Moreover, it is recommended to

use this study's expectations to apply to all types of organizations and business activities.

The results also recommend for governments to work on projects to enhance the governance

process and the forensic accounting focus, for the purpose of protecting the economy and the

governmental financial and nonfinancial performance

62
 Chapter (4): Like business approaches to develop
governmental organizations

The Impact of Inclusive Business on Ethical Values &

Internal Control Quality : An Accounting Perspective

ABSTRACT: The objective of this paper is to examine the impact of inclusive business on the internal ethical
values and the internal control quality while conceiving the accounting perspective. I construct the hypothesis
for this paper based on the potential impact on the organizations' awareness to be directed to the inclusive
business approach that will significantly impact the culture of the organizations then the ethical values and the
internal control quality. I use the approach of the expected value and variance of random variable test in order
to analyze the potential impact of inclusive business. I support the examination by discrete probability
distribution and continuous probability distribution. I find a probability of 85.8% to have a significant potential
impact of the inclusive business by 100% score on internal ethical values and internal control quality. And to
help contribute to sustainability growth, reduce poverty and improve organizational culture and learning.

Key Terms: Inclusive business, ethical values , internal control quality, accounting .

I. INTRODUCTION

This paper generates the awareness of organizations to direct their cognition to the

perspectives of current efforts of accounting and accounting boards to implicitly improve the

ethical values and the internal control quality of organizations (See, e.g., APESB 2012;

AICPA 2015; IESBA 2015). I construct my point in this paper on the hypothesis that, if

organizations awareness are directed to aid the society and contribute to it, particularly to the

poor people, there will be a significant impact on the internal ethical values and the internal

control quality in such organizations, which is resulting from the expected alteration of

internal culture in the organizations about ethics to the awareness about poor and problems of

the societies whilst conceiving the accounting perspectives.

As a demand to change and develop organizational culture, I find the perspective of

IFC& OECD a value-add to improve and develop such organizational culture. By analyzing

the studies in this regard of so called inclusive business, I find several evidences, WBCSD

&SNV (2006) state that inclusive business is the one which seeks to contribute to the poverty

alleviation by including lower – income communities within its value chain while not losing

sight of the ultimate goal of business, which is to generate profits.

63
 Researchers also provide evidences in this context. Gradl and Knobloch (2010) states

that inclusive business integrates people living in poverty into the value chain as consumers

or producers, UNDP (2008) states that inclusive business models build bridges between

business and the poor for mutual benefits, and WBCSD& SNV (2011) state that inclusive

business models integrate low-income communities in its value chain for the mutual benefit

of both the company and the community.

Moreover, BIF (2011) states that inclusive business goes further in creating new

economic opportunities for people living in poverty, perhaps as workers or consumers of

affordable goods or services, or as participants in low carbon and climate resilient growth.

Besides, Hahn (2012) demonstrates that the idea of inclusive business is mainly derived from

the observation that business activities can contribute to the long-term goal of poverty

alleviation by embedding the neglected poor part of the world population into efficient value

chains and market structures both as consumers and as producers or distributors, which in

turn can affect the economic outcomes as facilitator of human-well-being.

In this regard, financial crisis and ethical issues, notably arose from accounting ethical

dilemmas, have contributed to the change of various concepts in regard to how the business

models are arranged and planned. In the past decades, the organizational culture has led to

introducing new perspectives, and to recommend a rethinking and reshaping of the business

and the economic development (See, e.g., Heskett 1992; Svyanterk & Bott 2004; Hislop

2013; Vasenska 2013; Kambiz & Aslan 2014).

Hislop (2013) assumes that organizational culture is a significant factor to effective

innovation and learning, because organizational culture forms values, beliefs, and work

systems that could boost or impede both learning and knowledge sharing. I support in this

study that organizations will require different organizational culture to contribute to the

64
accounting perspective of accounting boards and the accounting studies to improve the

ethical values and internal control quality of organizations.

This is a concept that can be growing by the organization learning to improve

organizational culture. Moreover, inclusive business is interesting for companies because it

can offer new opportunities for innovation, growth, and competitiveness at the same time as

positive social and development impact, and also interesting for the poor because it brings

greater access, choice, and opportunity in their lives and future (See, e.g., Jenkins& Eriko

2010; BIF 2011; Virginie& Filippo 2011; Golja& Pozega 2012).

In regard to inclusive business recognition and definition, appears the innovation

initiatives, and empirical evidence suggests that organizational culture should consider

paying more attention to the factors which affect corporate innovation while at the same time

developing ethical codes and values and higher quality of internal control (See, e.g.,

Homburg& Pflesser 2000; Gregory et al. 2009; Hogan& Coote 2013; LI2& LIU3 2014;

Serpa 2015).

Accounting perspective addressed in this study is based on improving the ethical

values and internal control quality and can be concluded from empirical results revealing

problems in the area of the code of ethics for professional accountants and also in the area of

applying accounting standards and principles, for instance, such as conservatism and its

subsequent problems of earnings quality, accounting estimates, and risk management (See,

e.g., APESB 2010 ; AICPA 2014; IESBA 2015; Choi and Pai 2011; Simon et al. 2015;

Ferraro et al. 2015).

On the other hand, I hypothesize that, inclusive business approach impacts the internal

culture of organizations about ethics values in general, as by applying the approach, it is

probable that the business awareness for ethical values will improve to the degree of attaining

65
high quality internal control and avoiding ethical fraud dilemmas, as a result for directing the

organizations' staff and managers for community awareness rather than self-awareness.

This paper's major question is: "Is there an impact of inclusive business on ethical

values and internal control quality, whilst conceiving the accounting perspective?". To that

effect, this paper examines the expected value of the impact of inclusive business on

improving ethical values and internal control quality, using a probability distribution of

inclusive business scores indicating their significant impact and based on the number of

associated variables of inclusive business, as to result in estimating the probabilities and to

show the quality of the expected impact of inclusive business on ethical values and internal

control quality.

This paper uses the expected value and variance of a random variables test to analyze

the impact of inclusive business. The Empirical results as for the current stage of this paper

shows that 0.858 is the highest probability for the impact of inclusive business by 100% to

help assure my estimated findings that there is a significant impact of inclusive business on

the improvement of ethical values and internal control quality.

II. LITERATURE REVIEW

Increasing awareness about sustainability has directed the business environment to the

alertness of the significant negative influences. As, business encounters low performance and

problematic organizational culture, society encounters poverty and high level of ignorance

due to corruption, educational problems, lack of career opportunities, gendered problems, that

all contribute negatively to the approaches of sustainability growth and their role in

livelihood.

In the context of studies related to organizational culture, this study hypothesizes an

impact on organizations' learning and organizations' capabilities and can provide suitable

environment for innovation (See, e.g., Skerlavaj et al. 2010; Cameron & Quinn 2011).

66
Consequently, providing an expected improvement in the internal ethics values and internal

control quality as an accounting perspective. IFC & OECD (2015) address how to overcome

most of these problems through the perspective of inclusive business, as to address the

problem of how to interact with others, with clients and stakeholders by expanding the

studies and their results, and to expect an improvement in the organizational culture and

subsequently to impact creating and improving the perspective of inclusive business. On the

other hand, I hypothesize a potentiality of a significant impact of inclusive business on

business offering new opportunities for innovation and entrepreneurial initiatives. Therefore,

it has become an overcome for most of the problematic organizational culture as to improve it

and assist in the growth of ethical values and strengthening internal control quality and the

consciousness of the organization from the accounting perspective.

Few studies highlight the potential of impact of innovations on the short-term and

long-term economic growth and sustainability which are negatively affected by global

financial and economic crisis (See, e.g., OECD 2010; LI2& LIU3 2014; Stoffers et al. 2015).

Also, few studies show the way an organization learns and adapts (Vasenska 2013).

Kambiz & Aslan (2014) reveals that organizational culture exerts a complete mediating effect

on organizational innovation through organization learning. Therefore, organizational culture

has a significant impact on employees, people and groups in a variety of ways by interacting

with each other, stakeholders and clients (Ahmed et al. 2014), whereas, organizations are

affected by their culture, and consequently expecting to improve internal ethical values and

internal control quality from the accounting perspective.

In this regard, awareness has contributed to study the relations among inclusive

business, sustainability, innovation, and accounting perspective for internal ethical values and

internal control quality. Studies that have contributed to the regard of inclusive business are

promising for the expected future of this accounting perspective in the organizations. Thus

67
far, the inclusive business studied in the literatures suggest that business can contribute to

alleviating poverty in economically feasible ways ( See, e.g. Prahalad &Hammond,2002; .

Prahalad 2005 & 2009; UNDP 2008).

Halme et al. (2012) state that for this approach of inclusive business, organizations

should seek to utilize whatever scarce sources are available, as for instance, substantial

amounts of their free time, private-life roles and networks, or previously discarded

technologies. Also, in order to promote their inclusive innovation, and to mobilize internal

and external resources, Halme et al. (2012) also, find an implication that intrapreneurial

bricolage may be of fundamental importance in multinational corporations innovation for

inclusive business.

Sano (2014) shows that disability – related knowledge of entrepreneurs with

disabilities could contribute to business performance according to the key success factors to

enhance added value among the elements of the value chain of organizations as a method for

disability – inclusive business. Hahn (2012) focuses on the influence of inclusive business

approaches on various aspects of human dignity and provides exploration insights as bases

for future theory buildings, his analysis culminates insight that dignity can be if not already,

assured and promoted by deliberately including the poor into relevant value-added business

processes.

On the other hand, innovations preserve to promote the influence of inclusive

business. George et.al (2012) find considerations of inclusive innovation points to

inequalities that may arise in the development and commercialization of innovations, and also

acknowledges the inequalities that may occur as a result of value creation and capture.

In few studies, challenges and issues of inclusive business are represented by respective

points, Phrahalad and Hammond (2002) also Esposito et al. (2012), argue that the base of the

pyramid segment living in the developing economies poses an unment opportunity for global

68
organizations to design and implement inclusive business models for solving the real

problems of energy, healthcare, education, water, sanitation, in formation, finance, housing,

and transportation and other issues as well.

Nevertheless, Jenkins and Eriko (2012) states challenges to inclusive business as lack of

infrastructure, low levels of knowledge, and skills, and limited access to finance for low

income consumers and producers. Also, other studies can show challenges as associated with

poverty on top of the usual uncertainty associated with and business endeavor (See; e.g.

Virgins and Filippo 2011; Halme et Al. 2012; Wach 2012).

Halme et al. (2012) finds indications that these challenges may be engaged in acting

like entrepreneurs within their organization and try to bundle scarce resources in creative

ways in order to further their innovations. Furthermore, Wach (2015) finds that whilst

challenges, organizations are unable to provide information about the actual impacts of

business activities, and more higher quality, and less partial inclusive business evaluations are

needed to better enable harnessing the potential for business to contribute positively to the

development.

Afterwards, I address the major issue for challenges facing inclusive business in a

more propounded manner in respect to the organizational culture about internal ethical values

and the subsequent internal control quality from the accounting perspective as a challenge

questioning their expected improvement and their association with inclusive business. The

considerable studies in this context of accounting perspective are presented in their various

contribution to impact the improvement of ethical values and internal control quality.

Wang et al. (2014) demonstrates that companies which have enhanced their internal

control are more conservative, and in the context of accounting literature and perspective, the

conservatism is driven from accounting ethics to apply the GAAP and IFRS. Thus, Wang's

69
results show that the quality of internal control and accounting conservatism is positively

correlated. So, the conclusion is directed to the ethical values.

Schroeder and Shepardson (2014) find that internal control audits initially provided internal

control quality benefits. And to my view, this provides evidence for ethical values when

applying the GAAS in organizations. Defond (2015) finds auditing boards' ability to

remediate deficiencies in auditors' internal control audit procedures. This also, to my view is

subjected to ethical values for applying the GAAS. On the other hand, Wang et al. (2016)

find that the high quality of internal control significantly promoted the fulfillment of

corporate social responsibility in the levels of shareholders and government, which I

hypothesize as a probable driver to expand the principles of corporate social responsibility to

grow into the approach of inclusive business, as to, expect its contribution and impact on

improving the business internal ethical values and internal control quality.

Herein, Floyd (2016) finds internal control weakness indicates an elevated risk of

material misstatement, and there is evidence that additional disclosures attenuate the negative

information environment effects of an internal control weakness. To my view and in this

regard, the organizations should avoid such risk by growing their internal ethical values and

subsequently internal control quality, and in the meantime, disclose the contributions to the

society through inclusive business approaches, and methods used by the organization in this

regard.

To my view, if internal control quality has a significant correlation to ethical values,

consequently, this will promote the business and corporations to expand the contribution and

impact to community and the poor levels in the societies as one of the major accounting

perceptive in the organization following the standards of sustainability.

Moreover and formerly, IFC (2015) shows their investment in hundreds of companies

using the inclusive business approaches as these companies have achieved commercial

70
sustainability and growth while benefiting the poor, and recommend lessons to learn by

organizations worldwide.

My study mainly recommends among other things, to study the impact of inclusive

business on ethical values and internal control quality, from an accounting perspective as to

provide evidence for expected significant impact based on a probability approach of study.

Which I find a little lack in the previous literature in this regard of study.

In this essence, this paper examines the expected value of inclusive business for a

probability distribution of inclusive business scores for a sample of associated variables

subjected to ethical values improvement and internal control quality, based on estimation of

their probabilities to show the potentiality of the impact of inclusive business on the

organizational culture perceived by the improvement of ethical values and internal control

quality.

III. METHODOLOGY

This paper studies whether there will be an impact of inclusive business on the

improvement of internal ethical values and internal control quality from the accounting

perspectives. I use estimations of probabilities to help predict this potential impact.

Therefore, the two hypotheses of this paper are as follow: H1: There is a potential impact of

inclusive business on the improvement of internal ethical values and internal control quality,

and H2: There is no potential impact of inclusive business on the improvement of internal

ethical values and internal control quality.

Data:

The optimistic estimation of data of this paper is clear in the selection of data to help

predict the idea of this paper. Thus, in the essence of estimations subjected to conclusions

from interviews, discussions, searching and readings in the business community in various

fields, I suggest sitting the data based on the inclusive business percentages of impact to

71
contribute to improving ethical values and internal control quality ( x ). Whereas, I assign the

impact percentages for a major 6 estimations ranging from 0 to 100% , as, 0%, 20%, 40%,

60%, 80% and 100%. Subsequently, the significance of expected number of variables ( n ) to

contribute to the impact of inclusive business are estimated based on interviews, discussions,

searching and readings, these variables are estimated to be 15 significant variable related to

organization engagement with multi stakeholders, regoverning the market, the business

models to use for alleviating poverty, intrapreneurial bricolage in multinational corporations,

innovations and inequalities, inclusive development, new opportunities for innovations,

positive social and development impact, including low-income community in the value chain,

creating jobs and livelihood opportunities for low income people and households, expansion

of employment, entrepreneurial opportunities, innovate-operate and grow, create new

markets, and disability inclusiveness, that all are expected to attain the inclusive business

impact to the contribution to improving ethical values and internal control quality.

These 15 variables are associated to the inclusive business percentage of impact as

there is an estimation that with zero variables there is a P ( x ) = 0.00 probability of

contribution to the impact of inclusive business by 0% , with 1 variable there is P ( x ) =

0.07 probability of contribution to the impact of inclusive business by 20%, with 2 variable

there is P ( x ) = 0.13 probability of contribution to the impact of inclusive business by

40%, with 3 variable there is P ( x ) = 0.20 probability of contribution to the impact of

inclusive business by 60%, with 4 variable there is P ( x ) = 0.27 of contribution to the

impact of inclusive business by 80% , with 5 variable there is P ( x ) = 0.33 probabilities of

contribution to the impact of inclusive business by 100%.

Table (1) presents the sample observations by percentage of impact of inclusive

business ( x ) and the probability distribution P ( x ) based on the estimations of expected

number of variables ( n ) to contribute to the expected impact.

72
The Model:

To predict the impact of inclusive business on improving ethical values and internal

control quality, I examine the expected value of inclusive business percentage of impact for a

probability distribution of inclusive business scores ( x ) for a sample of associated variables

( n ) subjected to ethical values and internal control improvements and organization culture

and based on estimation to their probabilities to show the appearance of prediction impact.

Therefore, I use the MINITAB statistical package, to run the expected value and

variance of random variables test in order to analyze the potential impact of the inclusive

business, and then I support this examination by discrete probability distribution and

continuous probability distribution. This analysis to obtain takes the following formats:

E ( x ) =  x P ( x ) …….. (1)

Where:

E ( x ) = the expected value of the inclusive business percentage of impact

=  ( The mean )

x = Inclusive Business Percentage of impact to Contribute to improving ethical

values and internal control.

P ( x ) = The probability distribution of the number of variables that will

contribute to the impact of the inclusive business.

Var ( x ) = x P ( x )……… (2)

Where:

Var ( x ) = the variance summary of the variability in ( x )

x = Inclusive business percentage of impact to contribute to the ethical values

and internal control

73
  = the mean

P(x) = The probability distribution of the number of variables that will

contribute to the impact of the inclusive business.

TABLE 1
Sample Observations By Percentage of impact of Inclusive Business
& the Probability Distribution

The Percentage Impact on Expected Number of

Improving Ethical Values & Variables to Contribute to
Internal Control Quality, the Impact of the
from the Accounting Inclusive Business (*) The Probability Distribution
Perceptive.
(x) (n) P(x)
0% 0 0.00
20% 1 0.07
40% 2 0.13
60% 3 0.20
80% 4 0.27
100% 5 0.33
15 1.00

(*) ( n ) :
Organization engagement with multi stakeholders. Regoverning the market. The business models to use
for alleviating poverty. Intrapreneurial bricolage in multinational corporations. Innovations and
inequalities. Inclusive development. New opportunities for innovations. Positive social and development
impact. Including low-income community in the value chain. Creating jobs and livelihood opportunities for
low income people and households. Expansion of employment. Entrepreneurial opportunities. Innovate-
operate and grow. Create new markets. & Disability inclusiveness.

IV. RESULTS
Table 2 shows the results of the expected value of the inclusive business percentage of

impact to contribute to the ethical values improvement and internal control quality ( x ), the

table shows the calculations as the expected value of ( x ) = ( x ) P ( x ) = 73.2 as the

percentage of impact of using the inclusive business to contribute to the ethical values and

74
internal control quality for all variables. Therefore, I can initially predict that 73.2% to be the

percentage of the impact of the inclusive business. Thus, over the time and by the

development of inclusive business, the percentage of inclusive business success can be

predicted using the 73.2% expected value and to predict average number of variables ( n )

that would contribute to the impact of inclusive business, and as I estimated 15 variables ( n )

, so, ( 15 × 73.2 % ) = 11 variables approximately and can be predicted as to help contribute

to the impact of inclusive business, and their importance can be ranked based on the highest

probability in the probability distribution.

Table 2
Results of Expected Value of Inclusive Business Percentage of Impact

Ex (x) [x-Ex(x)]2
=  × Std.
2
x P (x) xP(x) ( x ) P ( x ) x-Ex(x) [x-Ex(x)] P(x) Var (x) Dev.

0% 0.00 0.0 73.2 -73.2 5358.24 0.00 625.76 25.02

20% 0.07 1.4 -53.2 2830.24 198.117
40% 0.13 5.2 -33.2 1102.24 143.291
60% 0.20 12.0 -13.2 174.24 34.848
80% 0.27 21.6 6.8 46.24 12.485
100% 0.33 33.0 26.8 718.24 237.019

Table 2 also shows the variability summarized by the variance Var (x) which = 625.76

to indicate how far a particular percentage of inclusive business impact from the expected

value Ex ( x ), and in this regard it is 625.76 – 73.2 = 552.56 and the standard deviation =

25.02 indicating low variability and significant prediction for the impact of inclusive

business. Figure 1 shows the normal probability distribution for the inclusive business

percentages of success, as it is optimal to have the percentage of success 100% with the Ex (

x ) = 73.2 and standard deviation = 25.02, where it shows the expected percentage of

75
inclusive business impact for each percentage in the range of 0%, 20%, 40%, 60% , 80% and

100%. The Minitab shows the normal probability distribution as the area of P ( x < = 100% )

= 0.8580 and the shaded area on the scale = 0.05.

Figure 1
The Normal Probability Distribution For The Inclusive Business
Percentages of impact

______________________
The normal probability distribution for the inclusive business percentages of impact, as it is optimal to have the
percentage of success 100% with the Ex ( x ) = 73.2 and standard deviation = 25.02, where it shows the expected
percentage of inclusive business impact for each percentage in the range of 0%, 20%, 40%, 60% , 80% and 100%.

Table 3 shows the overall normal probability distribution as an indication for the

highest probability of inclusive business success.

76
 TABLE 3

The Overall Normal Probability Distribution for the Percentage of impact of the Inclusive
Business

Inclusive Business Percentage of impact to

Contribute to Ethical Values &
Internal Control Quality The Normal Probability Distribution
(x) P(x)
60% 0.299
100% 0.858
0% 0.002
80% 0.607
20% 0.017
40% 0.092

On the other hand, continuous probability distribution can also assure and confirm the

percentage of impact to inclusive business as the results show that P ( x < = 100) = 0.858 ,

which is identical to the normal probability distribution at percentage of the 100% impact.

This paper results are supportive to the expected impact of inclusive business on the

improvement of ethical values and internal control quality, as it is potential that 0.858 is the

probability of the impact of inclusive business by 100% to help attain the H1 of this paper.

This can be interpreted by the significant impact this perspective is expected to help as to

contribute to internal ethical values and internal control, which is encouraged by the majority

of mangers and economic regulatory parties in the international economy and organizations

of high quality ethical values and internal control quality.

77
 V. CONCLUSIONS

I support my point in this paper to examine the expected impact of inclusive business

on the improvement of the ethical values and internal control quality of organizations to help

contribute to the sustainability, economic growth, reduce poverty and improve organizational

culture by learning and providing suitable environment for innovation and entrepreneurship. I

find an empirical evidence that 0.858 is the highest probability for the potential impact of the

inclusive business by 100% that is based on my estimation to the expected significance of

this paper’s perspective.

In this paper I find the appropriate method to examine my hypothesis by using the

expected value and the variance tests for analysis. Followed by a confirmation test, as I use

more probability analysis for more confirmation to the empirical evidence, I find additional

empirical evidence to support and confirm the paper’s perspective. The outcomes of this

paper lead to the expected impact of inclusive business to help assure my estimated findings

of the expected impact on the ethical values and internal control quality.

My analysis is based on optimistic estimation for the probability distribution that this

perspective will have a significant impact, based on the rationality and necessity of sustaining

an economic growth and solving problematic aspect resulted from economic and financial

crisis and problematic organizational culture raised by ethical issues and internal control

issues.

Future experimental research could attempt to restudy my findings in a different

manner for the expected variables to be associated to the future studies, and their numbers to

measure and predict the probabilities of their impact on the inclusive business impact. Future

researches also can encompass the appropriate prediction analysis and methods to predict the

inclusive business impact, and consequently, the impact on the ethical values and the internal

control quality over organizations of different types and nature, moreover, it is recommended

78
to use this study's empirical results not only to fulfill corporations but to fulfill the

governmental organizations and not- for – profits organizations.

79
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 Governmental Balanced Scorecard to Tackle Corruption
In the Governmental Sector

Governments work to find resources to allocate, and use for future planning and

development to fulfil the needs of the economy. Also, governmental activities are in terms of

providing services to the public. Therefore, it is vital to continuously evaluate the

governmental sector financial and non-financial performance, which in turn will assist in

tackling corruption in the governmental sector. Corruption is known as dishonest behaviour

by those in positions of power, such as government officials.

I consider the balanced scorecard as a tool to tackle corruption in the governmental

sector, so in order to activate this tool, governmental accountability should take place and

performance should be monitored and controlled by a governmental balanced scorecard.

Governments could work on this scenario by founding the cores and elements needed for

such governmental balanced scorecard.

Generally, balanced scorecard was originally developed for the private sector, and in

this article I focus on developing a governmental balanced scorecard to help governments in

decision making and strategic planning in a manner that leads to avoiding and tackling

corruption and to measure performance, for the purpose of reflecting what the government

and the strategies are all about. Thus far, corruption will be limited and potentially avoided.

In developing a governmental balanced scorecard, there are four fundamental

questions: 1) How governments look to their stakeholders? 2) What must governments excel

at? 3) How do customers and citizens see the government? 4) How can governments continue

to improve and create value? The four fundamental questions comprise the four perspectives

of governmental balanced scorecard as the following: 1) Financial perspective. 2) Internal

government perspective. 3) Stakeholders perspective. 4) Innovation and learning perspective.

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 As a consequence, performance measurement in governmental sector should indicate

the underlying drivers of either satisfactory or unsatisfactory performance as well as

profitability in business like sectors, in addition to efficiency of using resources.

Moreover, governments need to track what is working and what is not to make sure

that time and funds are spent well, and good governance is being adopted. On the other hand,

governmental balanced scorecard can improve efficiency, accountability and transparency of

governments’ processes.

To achieve the purpose of governmental balanced scorecard in tackling corruption, it

should be prepared on regular basis to cover the major perspectives of performance

measurement system. I propose in table (1) a governmental balanced scorecard to be

generally activated for the purpose of improving and monitoring the governmental

performance.

Table (1)

Governmental Balanced Scorecard for Governmental Services

Perspectives Strategic Objectives Performance Measures

Improve cost structure Saving in costs of services

Increase asset utilization
Financial Sustainability
Expand revenue opportunities
Efficient use of facilities and
resources
Level of business like activities
Fund raising from stakeholders

Improve governmental officials Evaluation results of

performance
Achieve improvement in
servicing excellence
Internal Process
Increase governmental officials
participation to sport activities
Increase governmental officials
participation to social activities
governmental officials
Budget spent on officials
developments
Number of officials attending
sport activities
Number of social activities

Continued on the next page ,,,,

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 Promote government image
Oversight governmental board
satisfaction
Stakeholders
Governments official loyalty
Increase quality of services
Encouraging partnership with
related governments
Improve staff satisfaction
Technology implementation
Learning and Growth
Knowledge enhancement
International ranking
Reputation weight
Citizens evaluation
Tackling unemployment
Government performance rate
Government growing rate
Officials leaving work
Quality assessments
Joint projects and activities
Satisfaction surveys
Number of courses using new
technology
Number of seminars attended

From table (1), governments’ growth and progress can be achieved by the flexibility

of the governmental balanced scorecard in order to obtain continuous improvement and

measure how well the government accomplishes its strategic objectives, this governmental

balanced scorecard is developed to include financial and non-financial indicators as part of

the governments reporting system. Moreover, the governmental balanced scorecard is more

understood as effective tool for external performance reporting as well as strong incentive for

external accountability.

In summary, I propose the governmental balanced scorecard to better tackle

corruption by measuring governmental performance to achieve governmental strategic

objectives, which in turn provides a hopeful future vision for researchers in this regard as to

expand their research opportunity, and encourages them to empirically measure the effect of

this governmental balanced scorecard on improving performance and subsequently tackling

corruption.

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This book aims to present various important aspects and trends regarding the governmental accounting and
reporting models in the international environments. Whereas, Governmental accounting and reporting models are
multiple and ununified internationally, and there are trends in the governmental environments to take into account in
this book. The first chapter lists the governmental accounting and reporting models, and investigates which
governmental accounting and reporting models most cause the differences among countries. The second chapter
shows how the changes in governmental accountability can impact the change in total governmental revenues relying
on analysing and studying the governmental financial reports and the governmental accounting information. Both
chapter one and two encourage future research to expand analysis and empirical evidence in this regard. The third
chapter proposes extending dimensions of forensic accounting to influence various significant governmental
perspectives, for its role in positively impacting and improving the governmental organizations’ strategies and
accountability, which in turn, help contribute to the economy growth, reduce corruption and improve organizational
behaviors. The fourth chapter and the final presents a business approach recommended to apply to the governmental
environments, which is focusing on showing how to predict and examine the impact of inclusive business on the
internal ethical values and the internal control quality while conceiving the accounting perspective in the
governmental sectors, as to help contribute to sustainability growth, reduce poverty and improve organizational
culture and learning, the chapter also presents that governmental accountability can be monitored and controlled
using the balanced scorecard as to tackle corruption.

Tamer El Nashar is a full – time accountant in the financial department of one of the Egyptian governmental
institutions for marine transportation services, his duties are related to internal auditing, control, and budgeting. He
is also a part–time lecturer of Accounting, Financial analysis and Finance in the school of continuing education, the
business studies division in the American University in Cairo. His Master degree is in the area of costing and
budgeting year 1996 from Suez Canal University, his PhD is in the area of financial accounting and banking year
2004 from Suez Canal University as well. He has participated as a presenter and attendee in some of the conferences
usually held by the American University in Cairo and the School of Continuing Education. His research area is in
the areas of accounting, auditing, financial analysis, management accounting, banking and governmental accounting.

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