Husam Aldeen Al-Khadash

Putting Audit Approaches in Context: The Case of Business Risk Audits in Jordan

Large international audit firms are increasingly expanding their activities around the world and increasingly promoting the concept of a similar quality audit to be performed by all their worldwide offices and member firms. This strategy includes developing and using a similar audit approach globally. This study surveys the views of Jordanian auditors, mainly from audit firms with international affiliations, about how such an international approach, with emphasis on the currently popular business risk approach, is applied in practice by Jordanian audit firms and how appropriate and practical the application of such an international approach to auditing is in different contexts. The results of the study show that the business risk approach has been generally adopted by the larger Jordanian audit firms to varying extents, especially those which are full members of an international audit firm network. However, audit clients in Jordan face too many business risks, especially because of poor control systems, poor corporate governance structures, and unclear or non-existent corporate strategies and objectives. These risks have to be addressed by the business risk approach under very low audit fees. Such factors have led to the business risk approach not being applied in the way that the large international audit firms intended, and not achieving the approachs main objectives, leaving the audit profession with the question of how appropriate it is to adopt an international audit approach in different contexts.

The diffusion of activity-based costing in Jordanian industrial companies

Purpose - This paper seeks to focus on the diffusion of activity-based costing (ABC) in Jordan. A conceptual framework from general diffusion theory is adopted to describe the diffusion process within the Jordanian industrial sector. The main objective of the study is to determine the motivations for the implementation or non-implementation of ABC. Design/methodology/approach - Semi-structured interviews were conducted with financial managers and heads of costing departments of companies within the Jordanian industrial sector. Both face-to-face and telephone interviews were used to achieve the research objective. Findings - It was found that the rate of implementation of ABC in the Jordanian industrial sector follows the classical S-shape. It is also suggested that the supply side of the diffusion process, most notably the role played by consultants, was an influence on many companies. This was not, however, a sufficient condition for companies to implement ABC. Originality/value - Most previous studies focus on the implementation of ABC in Western developed countries. The results of this study make a contribution to existing knowledge in the area of the implementation of ABC, especially in Eastern developing countries such as Jordan. In addition, this research adds further evidence to the value of studying management accounting, and more specifically changes in management accounting practice. It describes the developments undertaken in the implementation of a new system and how a new system becomes accepted in practice.

Factors that catalyse, facilitate and motivate the decision to implement activity‐based costing in Jordanian industrial companies

Purpose - In spite of facilitating and motivating factors in the external environment, the implementation of new management-accounting techniques as activity-based costing (ABC) in companies is disappointing. The aim of the study is to determine factors that catalyse, facilitate and motivate the decision to implement ABC in Jordanian industrial companies. Additional objectives include determining the problems associated with ABC implementation and assessing the degree of success of ABC implementation in Jordan. Design/methodology/approach - A sample of the Jordanian industrial companies was selected and a questionnaire survey was employed using a five-point Likert scale to collect data from the financial managers, descriptive and analytical statistics were used to analyze the collected data. Findings - The findings indicate that the most important factor that facilitates the decision to implement ABC was the provision of adequate training and the most influential factors which motivate the process of ABC implementation include an increasing proportion of overhead costs, and an increasing number of product variants. Consequently, this study found that the interaction of three types of factors (catalysts, facilitators and motivators) create the potential for change in these companies. Barriers to change could make the change process slower, hindering, and even preventing change; and barriers to change were identified that may explain the differing implementation rates of ABC in the Jordanian industrial sector. The greatest barrier to implementing ABC was found to be its high cost of implementation, followed by the high cost of ABC consultancy and computer staff time. Originality/value - The study adds new elements to the institutional approach, and integrates it with concepts from psychology and organizational culture, to create a better understanding of management accounting. The results of study contribute to existing knowledge in the area of understanding the factors which act as catalysts, facilitate, and motivate ABC innovation and of those factors that create barriers to ABC implementation in Jordan.

The implementation of activity-based costing and the financial performance of the Jordanian industrial shareholding companies

The purpose of this study is to investigate the improvement in financial performance associated with the use of activity-based costing (ABC). Data were obtained through a cross-sectional mail survey of financial managers who furnished information regarding company financial performance, the extent of ABC usage, and the enabling conditions that have been identified in the literature as affecting ABC efficacy. Data were obtained from the Jordanian shareholding companies as of the end of 2009. Regression analysis is used to test the association between the awareness level of using ABC and the level of adopting ABC. It is also used to identify the improvement in ROA as a mean of financial performance which associated with ABC initiatives. Results show that the awareness level of using ABC is high among the financial managers, but ABC implementation is not high; also it is found that there is a positive association between ABC and improvement in ROA.