Does IPSAS adoption reduce corruption’s level? New evidence from ODA beneficiary countries

Published date07 April 2021
Date07 April 2021
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorMounira Hamed-Sidhom,Yosra Hkiri,Ahmed Boussaidi
Does IPSAS adoption reduce
corruptions level? New evidence
from ODA benef‌iciary countries
Mounira Hamed-Sidhom,Yosra Hkiri and Ahmed Boussaidi
Faculty of Economic Sciences and Management of Tunis,
UR17ES07 FCF Research Unit, University of Tunis El Manar, Tunis, Tunisia
Purpose The accounting literature suggests that the use of accounting standards with greater quality
promotes the f‌inancial reporting quality and enhances accountability. This study aims to investigate the
effect of the International Public Sector Accounting Standards (IPSAS) adoption, by off‌icial development
assistance(ODA) benef‌iciary countries,on the reported level of theirperceived corruption.
Design/methodology/approach We investigate a sample of ODA benef‌iciary countries(168 country-
year observations)facing rising levels of corruption. We apply a panel regression analysisfor these countries
during the periodfrom 2015 to 2018.
Findings The f‌indings suggest that the IPSASadoption can signif‌ic antly inf‌luence the level of
perceived corruption and implement important evidence about promoting transparency f actor for
underdeveloped countries.
Originality/value This study contributes to the accountingliterature by examining the theoretical and
empirical insights about the impact of the of IPSASadoption on the level of corruption, which can be
considered as a new area of accounting literature and a useful signal forstakeholders in countries seeking
adequatesolutions to combat and f‌ight corruption activities.
Keywords IPSAS, Corruption, ODA benef‌iciary countries
Paper type Research paper
1. Introduction
The International Public Sector Accounting Standards (IPSAS) have become an
international benchmark forthe assessment of public accounting practices worldwide. As a
result, governments in developing countries have begun the implementation of IPSAS to
enhance the credibility of f‌inancial reporting, public conf‌idence and attract foreign
investment throughoutreducing the level of their perceived corruption.
By this meaning, the accounting literature suggests that improved accountability
leads to a decrease in the perceived levels of corruption (Monfardini, 2010;Zarb, 2008),
as opportunities to conceal corruption practices within an internal administrative
Based on this evidence, the purpose of this study is to provide a new meaning of the
reasons for the need to reform the countrys public accounting system throughout the
implementationof full accrual accountingbased on the IPSAS.
In developing countries, Hughes (2013) underlines that the adoption of IPSAS is a
determinant of paramount importance in strengthening the capacityof governments in
providing legislators, citizens, media and other stakeholders, with understandable,
relevant, reliable and comparable f‌inancial statements. Therefore, it seems that this
step would improve the quality of f‌inancial accountability and national governance.
Journalof Financial Crime
Vol.29 No. 1, 2022
pp. 185-201
© Emerald Publishing Limited
DOI 10.1108/JFC-12-2020-0255
The current issue and full text archive of this journal is available on Emerald Insight at:
By this, the initiative to development of the harmonized accounting policy seems to be a
key determinant in strengthening the budget executing process and improving the quality
of the national f‌inancial reportingprocess.
Besides, the PWC (2013)s report indicates that greater transparency and accountability
are the main benef‌its of IPSASadoption, which callsfor a trend toward accrual accounting
and was applied to meet the needs of transparency, eff‌iciency and management
performance. The same organism argues that poor accounting and f‌inancial management
systems expose public off‌icials to fraudulent and corrupt practices such as conf‌licts of
interest, corruptadministrative procedures, illegal bonuses and economic extortion.
Sanderson and Van Schaik (2008) argue that the higher level of budget waste and
corruption in developing countries is because of the lack of a great accounting framework
for the public sector.
Other studies have also suggestedthat the lack of standardized reporting and disclosure
requirements has contributedto an increase in the corruption levels of developing countries
(Chan, 2003;Chan, 2006).
Effective accounting systems that lead to sound f‌inancial information systems by
governments are expected to provide citizens with information regarding the sources and
employments of public resources, which enables them to assess the eff‌iciency and
effectiveness of publicservants in the management of public resources.
This management mechanism is more likely to contain government off‌icials and induce
them for using public funds in the interests of citizens. For this purpose, accounting
standards are developed to prescribe an appropriate accounting treatment and disclosure
requirements for f‌inancial transactions, thereby ref‌lecting the economic and commercial
substance of those transactions.
The rest of this study is structuredas follows: in Section 2, we provide previous literature
considering the researchs background and the developed hypothesis of the study, right
after we present the methodological aspect and the research design of our study, and then
the analysis and interpretation of our f‌indings regarding our hypothesis and f‌inally the
studys conclusion.
2. Literature review and hypothesis development
This part of the study will brief‌ly review the research on corruption issues, government
accountability and the role that effective f‌inancial information systems can play in
strengthening government accountability and thereby reducing reported levels of
government accountabilityand perceived corruption.
Corruption activities can exist in all societies; Pellegrini and Gerlagh (2008) argue that
corruption is a widespread phenomenon that affects all societies to varying degrees at
different times. They refer to European presidents accused of corruption but immune from
legal charges becauseof their immunity.
In this, Mauro (1998) states that corruption levels specif‌ic to developing countries are
most likely consideredhigher than levels of corruption in developedcountries.
Pellegrini and Gerlagh (2008) also argued that corruption is not uncommon, even in
humanitarian emergencies. They suggest that efforts, in the aftermath of the 2004 tsunami
earthquake in SoutheastAsia, have been hampered by corruption practices.
Corruption issues should, therefore, concern the research community, as well as
developing countries,given the high levels of poverty in developing countries.
By this meaning, we could assert that there is an urgent need to develop management
and governance monitors strategies that can help to decrease corruption attributes in the
future and, more importantly,tackling actual corruption practices.

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