The Accuracy Of The Annual Financial Report Data: An Empirical Analysis Of GCC Firms

Abstract

Company’s might try to enhance the picture of their income numbers (looks better than it should be) in the eyes of the reader of their annual financial reports.  These information could be used by investors and accounting researchers who their decisions depend on the information provided in financial reports.  When companies engage in income enhancement, investment decisions may be adversely affected.  The objective of this paper is to examine income numbers in a sample of the Gulf Cooperation Council (GCC) firms (UAE, Qatar, Oman, Saudi Arabia, Kuwait and, Bahrain) to determine if the frequency of the second digits conforms to the expected distribution.  The results indicate that the null hypothesis could be rejected, suggesting the annual financial data may not be as accurate as expected.  In other words, income enhancement at the second digit exists. We also discussed accounting standards that have been used by these companies.