Login / Register Submit Your Article
cover
Journal of Innovations in Economics & Management

Volume 5, 2024 - Issue 6

Submit Manuscript Journal Homepage
Latest Issue
Input keywords, title, abstract, author, affiliation etc..
Article Menu
Browse this journal
Vol. 6 (2025)
Vol. 5 (2024)
Vol. 4 (2023)
Vol. 3 (2022)
Vol. 2 (2021)
Vol. 1 (2020)
News more >>
5 February 2024 Scholarly Synergy Press Accelerates Global Academic Publishing Expansion with Three New Journals
15 January 2023 2023 The 2nd InternationalConference on Cyber Security, Artificial Intelligence and Digital Economy（CSAIDE 2023）
4 March 2021 Canadian Society for Engineering Management members can subscribe to EIT for only $100 per year!
Associated journals

Journal Article An open access journal
Journal Article

Does the choice of different accounting policies for forward foreign exchange contract hedging affect audit risk? --Take Greenworks Jiangsu as an example

by Ziyu Wang 1
1
Independent author
*
Author to whom correspondence should be addressed.
JIEM  2024 5(6):105; https://doi.org/10.69610/j.jiem.20241231
Received: / Accepted: / Published Online: 31 December 2024
View Full-Text
Download PDF

Abstract

Should an enterprise account for a foreign exchange forward contract as a financial asset or a hedging instrument? How might different accounting policies impact the firm’s key financial metrics, and could these metrics imply surplus management motives? Furthermore, does this introduce heightened audit risk for auditors when reviewing derivative financial assets? These questions commonly arise in annual audits of listed companies. This paper addresses these concerns by examining the relevant provisions of CAS22 and CAS24, using Greenworks (Jiangsu) Company Limited as a case study. Through a blend of theoretical analysis and practical insights, the paper identifies specific audit risks that certified public accountants should consider when auditing financial derivatives for listed companies. Practical recommendations are also provided to help mitigate audit risks. By offering strategies for the reasonable use of financial derivatives, this paper aims to reduce the audit risks associated with hedging activities, contribute to research in the field, and support the ongoing advancement of the auditing profession.

Keywords: hedging operations; accounting treatment; audit risk;
Copyright: © 2024 by Wang. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

Share and Cite

ACS Style
Wang, Z. Does the choice of different accounting policies for forward foreign exchange contract hedging affect audit risk? --Take Greenworks Jiangsu as an example. Journal of Innovations in Economics & Management, 2024, 5, 105. doi:10.69610/j.jiem.20241231
AMA Style
Wang Z. Does the choice of different accounting policies for forward foreign exchange contract hedging affect audit risk? --Take Greenworks Jiangsu as an example. Journal of Innovations in Economics & Management; 2024, 5(6):105. doi:10.69610/j.jiem.20241231
Chicago/Turabian Style
Wang, Ziyu 2024. "Does the choice of different accounting policies for forward foreign exchange contract hedging affect audit risk? --Take Greenworks Jiangsu as an example" Journal of Innovations in Economics & Management 5, no.6:105. doi:10.69610/j.jiem.20241231

Article Metrics

Article Access Statistics

References

  1. Gay, G.D. and J. Nam, The Underinvestment Problem and Corporate Derivatives Use. Financial Management, 1998. 27(4): p. 53-69.
  2. Smith, C.W. and R.M. Stulz, The Determinants of Firms' Hedging Policies. The Journal of Financial and Quantitative Analysis, 1985. 20(4): p. 391- 405.
  3. Mackay, P. and S.B. Moeller, The Value of Corporate Risk Management. Journal of Finance, 2007. 62(3): p. 1379-1419.
  4. Gordon, et al., The Impact of Institutional Differences on Derivatives Usage: a Comparative Study of US and Dutch Firms. European Financial Management, 2003.
  5. Goyal, V.K., et al. Investor Characteristics, Relationships, and IPO Allocations. 2010.
  6. Fu Zongyao, Empirical Study on the Motivation of Derivative Instrument Usage and the Impact on Firm Value, 2011, Guangdong Business School.
  7. Wang Xiaoqin & Mi Hong, An empirical study of CSI 300 stock index futures hedging. Academic Forum, 2007(7): p. 4.
  8. Huang Li, Accounting Disclosures for Derivatives, 2009, Southwest University of Finance and Economics.
  9. Aman Kim, Does Derivatives Trading Profit and Loss Disclosure Affect Instantaneous Stock Prices? --an analysis based on A-share listed companies in 2020. Journal of Nanjing Audit University, 2022. 19(04): pp. 81-91.
  10. Zhengqiang Li, Weifeng Ma & Ziwei Zhang, Hedging increases firm value. China Finance, 2024(10): pp. 62-63.
  11. Oh, H.T. (2015). KIFRS Adoption and Audit Risk. indian journal of science and technology, 8, 547-553.
  12. Li Liying, Reflections on the Characteristics of Derivative Financial Instruments and Their Risk Management in China. Friends of Accounting, 2008(21): pp. 83-84.
  13. Ranasinghe, T., L. Yi and L. Zhou, Do Auditors Charge a Risk Premium? Evidence from the Association between Derivative Hedging and Audit Fees. Social Science Electronic Publishing, 2020.
  14. Cheng Zhe, Research on Auditing Issues Related to Corporate Hedging. Finance and Accounting, 2015(7): pp. 59-61.
  15. Yu Gaoqi et al, Research on audit risk and effective control of derivative financial instruments. Business News, 2019(24): p. 92.