COVID-19 impact on accounting, financial reporting

Legitimacy theory explains management’s behavior in developing voluntary disclosures. In other words, management gets motivation to prepare disclosures to portray that whatever they are doing is ethical and as per https://www.bookstime.com/blog/pandemic-and-accounting-industry social norms and values. Business activities are reported and communicated through accounting disclosures. Hence, the role of accounting disclosure in decision-making process of stakeholders’ is very meaningful.

To manage successfully, accounting firms need to make sure they don’t have all their eggs in one basket. In the best of times, companies with accountants who manage well-organized finances and audit-ready processes give shareholders and potential investors confidence as to its direction and fiscal health. Now, in a volatile economy where some industries are experiencing unprecedented hardship and others are poised to grow, the need to maintain this confidence is more critical than ever. As they manage, adjust and, eventually, resurface from the pandemic, most companies will need to be smart with their finances. Accountants and corporate finance professionals will help increase efficiency by comparing pricing scenarios, evaluating investment opportunities and looking for new ways to reduce operating expenses.

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Hair et al. (2014) stated that the fitness of every individual item to make any specific constructs are confirmed by Convergent Validity. Besides, AVE analysis assesses the extent of variance controlled by a construct regarding the variance originated from random measurement error (Fornell and Larcker, 1981). Moreover, CR and AVE are calculated as measures of scale or construct reliability. Bagozzi and Yi (1988) conclude that the extent of CR needs to be greater than 0.6 to attain high internal consistency and reliability measure.

Some studies that have been carried out have found that 7 in 10 accountancy firms have been busier during COVID-19. In the same studies, the challenges that were being faced by accountancy firms included an increased workload, higher stress and more meetings. When asked if there had been any changes to their office set-up, respondents answered in a variety of ways.

Analysis and critical thinking

The employees will dictate the rules in the coming years, and practices will flourish only when they keep their staff happy. In an effort to quell COVID-19’s spread, hard-hit nations issued quarantine and stay-at-home orders to their populations, and nonessential businesses were ordered to cease operations. The global economy went into a tailspin as consumer spending tumbled and organizations everywhere suspended operations. The study adopted a quantitative approach where the researchers collects, analyzes and interprets findings using a descriptive and inferential statistics.

Additionally, if a business’s production levels fall dramatically (for instance, if production lines are shut down or reduced), fixed overhead costs will contribute more to the cost of items produced. These factors must be considered when valuing inventory for reporting purposes. Relationship between sale of idle assets, frequent risk assessment and frequent budget and plan evaluation.