This is good news because this theme was under-researched for a long time. 1, pp. 1, pp. Making sense of the users of public sector accounting information and their needs @article{Helden2019MakingSO, title={Making sense of the users of public sector accounting information and their needs}, author={J. V. Helden and C. Reichard}, journal={Journal of Public Budgeting, Accounting & Financial Management}, year={2019}, … Pollitt, C. (2006), “Performance information for democracy: the missing link?”, Evaluation, Vol. Cohen, S. and Karatzimas, S. (2015), “Tracing the future of reporting in the public sector: introducing integrated popular reporting”, International Journal of Public Sector Management, Vol. Financial Audit: Intended to verify financial statements, accounts and balances as per generally accepted accounting principles. Investors. Most authors used primarily a descriptive approach. Opinions and preferences of the accounting profession also count, e.g. Finally, intermediaries may play a role between users and preparers. While several articles confirm a higher usability of accrual data (mainly for internal management decisions; Andriani et al., 2010; Kober et al., 2010; Paulson, 2006), other authors identify a higher usability of cash data (Brusca and Montesinos, 2013; ACCA, 2015; Caruana and Farrugia, 2018). Guarini, E. (2016), “The day after: newly-elected politicians and the use of accounting information”, Public Money & Management, Vol. demanders and suppliers), this approach might underplay the more fundamental differences in interests between the two. Generally, AI can focus at past, present or future periods. The findings of a survey by Clark (2001) in respect of users public sector annual reports in Victoria, Australia are contrasted with the findings of a later survey of the needs of users of public sector financial reports conducted in Cyprus (Krambia-Kapardis & Clark 2010). The differing objectives and stakeholders result in fundamental differences in how financial operations are carried out. There are many possible users of the financial information generated by a business. Basically, a certain AI has to meet the actual information needs of the user. Yamamoto, K. (2008), “What matters in legislators’ information use for financial reporting? the labor unions and the business sector), as well as the consultancy industry. Several of the reviewed articles identify a number of antecedents having an impact on user attitudes and on the level of perceived usability and actual use. The starting point of our selection of articles is papers published in a special issue of Public Money and Management in 2016 (Vol. Assumed accounting knowledge is more disputable for purely financial information items, especially when they originate from accrual accounting, than for non-financial information. Does the business have enough capital for future growth? 36 No. 363-382, (*). 1, pp. With regard to the actual use of AI, some antecedents have been mentioned, e.g. Those actors which directly or indirectly influence the supply and the use of AI, like preparers of financial reports or information brokers supporting, e.g. We also discussed opportunities to support users in engaging more in the design of financial documents according to their specific interests and needs. Moreover, citizens are represented by elected politicians in the legislative, who due to their involvement in the decision making or accountability about policy programs and projects have to be seen as a main group of AI users. For example, at both levels, a balanced financial statement or cost levels of various programs can be relevant, whereas at the central governmental level macro-economic and fiscal issues, such as the level of public debt, the inflation rate and redistributive impacts of social benefits and health care programs have an additional role to play. Apart from them, other purposes of information use may play a role: for instance, the “political” use of information, e.g. Usability means that the users of the information in an accounting document potentially appreciate it for supporting their decision making or accountability. This normative view on user needs – what users ought to need – also underplayed that users might want certain kinds of AI for other than rational purposes, for example, for justifying their vested interests. 19 No. E-mail: info@charterededucation.com, What you Need to Know About Inventories for IAS 2, Journal Entries for Financial Assets and Financial Liabilities held at Fair Value Through Profit or Loss (FVTPL) under IFRS 9. The tensions arising from this observation are twofold. It has to be acknowledged that the redesigning activities are subtle collaboration processes in which consultant-researchers may face the risk of being too dominant. Another option is arranging committees comprising diverging stakeholders which discuss alternatives for the new standards and ultimately come to a shared advice to the body in charge of deciding about these standards. User needs are not the only determinant of accounting standards. These financial statements are formal reports providing information on a company’s financial position, cash inflows and outflows, and the results of operations. A restriction of the review to the last 15 years is appropriate because other reviews (Buylen and Christiaens, 2016, pp. IPSASB (2012, p. 11) lists a broader set of criteria to which financial reports must adhere: relevance, faithful representation, understandability, timeliness, comparability and verifiability. ACCA (2015), “Consolidated government accounts: how are they used?”, Association of Chartered Certified Accountants, London (*). Buylen, B. and Christiaens, J. IPSASB (2006), “Public sector conceptual framework”, International Public Sector Accounting Standards Board, Toronto, December. The IPSAS-Board, for instance, issues regularly proposals (exposure drafts) for new or updated accounting standards and asks for comments and feedback (e.g. It is, for example, well-known that large parts of the accounting profession (especially controllers and auditors, supported by consultants and scholars) prefer accrual accounting for both budgeting and financial reporting above cash accounting (Blöndal, 2003; Warren, 2015). – survey research on Dutch aldermen’s use of performance information, The role of consultant-researchers in the design and implementation process of a programme budget in a local government organization, Challenging the NPM Ideas about performance management: selectivity and differentiation in outcome-oriented performance budgeting, Struggling with ambiguity: public managers as users of NPM-oriented management instruments, A critical literature review and a challenging research agenda on politicians’ use of accounting information, Cash or accruals for budgeting: why some countries changed their budgeting mode and others not, What matters in legislators’ information use for financial reporting? The link between diverging user groups and their specific needs for AI is one of the most promising research routes. Moreover, their use of accounting documents is often obligatory. If, for example, user groups (i.e., service users and resource providers), as well as objectives (i.e. Required: i) In relation to the Conceptual Framework, which category of users is regarded as primary users of the GPFRs of public sector entities? Analysing the presence of financial information in councilors’ speech during the budget debate in Flemish municipal councils, The use and non-use of the government financial report by Maltese members of parliament, Accounting, Auditing and Accountability Journal, Who uses financial reports and for what purpose? These renewals of the accounting standards were based on proposals prepared by an advisory committee, in which various parties were represented, especially the Association of Dutch Municipalities, the Ministry of the Interior and Kingdom Relations, as well as representatives from some municipalities and provinces. Although it is valuable to get an in-depth understanding of both sides of the market for AI (i.e. 19 No. The authors’ view is based on the available literature which points to unresolved or contested issues, and also on our own research experience. In general, according to the reviewed articles, both purposes of AI use are empirically equally relevant. These standards often originate from private sector accounting standards (see, for instance, Ellwood and Newberry, 2016). The first two subsections are not only about methods of data collection, especially surveys, interviews and observations, but also about how user needs can be measured in each of these methods. Creditors and investors, often seen as the main users of private sector financial reports, are likely to belong to either the second or the third group. and van Helden, G.J. They have to rely on the financial statements and annual reports, auditor’s report and directors’ report etc. Such “information brokers” can help users to “digest” complicated AI or to focus on the use of AI on relevant parts. Observational studies in particular could investigate to what types of actions budgets or financial reports may lead, including finding support for either abolishing or initiating alternatives for the proposed policy making. Andriani, Y., Kober, R. and Ng, J. Surveys based on items ordered along a Likert-scale were particularly often used. 449-460. The empirical results about preferences concerning budgets or financial reports differ, obviously because of varying underlying purposes and motivations of the diverging user groups. In accordance with the target objective several kinds of audit can be defined in Public Sector. (2012), “Some like it non-financial…”, Public Management Review, Vol. A position-practice approach”, Public Money & Management, Vol. Evidence from capital providers”, Accounting in Europe, Vol. 19 No. The aim is to involve different types of stakeholders in order to achieve broad support for these renewed standards. 249-264. 3, pp. and van der Kolk, B. The paper proceeds as follows. 20 No. Altogether, from the about 50 identified articles we selected 30 articles for a detailed review which explicitly dealt with the subjects of our study. Based on such item-by-item comparisons, a ranking of all items could be made. and Solstad, E. (2014), “Managerialism and profession-based logic: the use of accounting information in changing hospitals”, Financial Accountability and Management, Vol. The passage of Wisconsin’s Act 10, Managerialism and profession-based logic: the use of accounting information in changing hospitals. 4, pp. Performance information for democracy: the missing link? Caruana, J. and Farrugia, B. From a normative perspective, “the public,” i.e. in Anglo-Saxon countries where the democratic legislator mandates accounting bodies for setting up accounting standards. The following review is based on literature published over the last 15 years dealing with the use of AI in the public sector from an empirical perspective. Pernsteiner, A., Becker, D., Fish, M., Miller, W.F. 144-153, (*). The big question for performance management: why do managers use performance information? Anthony, R. (1980), “Developments in state and municipal accounting”, Government Accountants Journal, Winter, pp. There are various different users of financial statements, each with different information needs. 7, pp. After a review of the recent literature on user types and their needs, use purposes and issues of usability and use of financial information are presented in Section 2, the subsequent Sections 3–5 address the themes as introduced above. They are keen to know the financial health of a business to get a fair idea of the firm’s niche market, business environment, and economic atmosphere of the country. The reviewed literature offers a broad picture of users of AI. Performance budgeting – is accrual accounting required? 36 No. (2004), “An investigation of the information requirements of the users of Australian public sector financial reports”, PhD-thesis QUT, Brisbane, (*). From a user perspective, relevance and understandability seem to be the most important because these criteria, respectively, focus on helpfulness for decision making and accessibility of the provided information. Accounting standards for local government are mostly developed at the national (or state) level, and as far as these standards do not give much room for an organization-specific elaboration, the emergence of user needs has to be arranged at this higher level. They have been mentioned as follows: Public sector accounting and the post-NPM: out of the Golden (C) age? politicians, would be another relevant field of study. 7, pp. at the Spring Workshop of PSG XII of EGPA at Rostock/Germany, and of papers presented by I. Saliterer et al. Suppliers rely more on certain items than others, especially those … We will largely disregard the perspective of preparers of AI, and we will also ignore another issue as addressed in the literature review, i.e. Another issue: although the use of AI by capital providers and creditors is well-researched in the private sector context (e.g. Blöndal, J.R. (2003), “Accrual accounting and budgeting; key issues and recent developments”, OECD Journal on Budgeting, Vol. (2016), “A critical literature review and a challenging research agenda on politicians’ use of accounting information”, Public Money & Management, Vol. Did the business reinvest all its profit? 56-64. ter Bogt, H.J., van Helden, G.J. The latter obligation is inspired by the desire to stimulate members of the legislative to compare the performance of their own policy fields with that of colleague-governments (benchmarking), and in doing so, stimulate an active use of the budget by these councilors. Tensions and dilemmas of public sector accounting users are reflected in Section 6, and Section 7 presents our conclusions and reflects on future research directions. From a formal point of view, a distinction among “recipients” and “users” may be appropriate, where the former are the addressees of certain AI but not necessarily also “using” such information for certain purposes (Mack and Ryan, 2006). Another option is a learning approach where users are at first exposed to accounting documents to test their understandability. (2015), “Challenging the NPM Ideas about performance management: selectivity and differentiation in outcome-oriented performance budgeting”, Financial Accountability and Management, Vol. It has to be emphasized that oversight bodies can have a strong position as a user group of AI of a public sector organization, when they are legally enabled to enforce regulations and provide financial support to this organization. Acknowledging that financial reports have to adhere to a common format for providing comprehensive information does, however, not exclude that different user groups will be interested in diverging accounting issues and each of these issues has to be presented in an understandable, that is, user-friendly manner. Second, there are more independent users like legislators or other kinds of politicians and managers who do not depend on general financial reports but are able to request specific information for their particular needs. To further illustrate the importance of financial statement analysis, let’s dive into each of these three primary reasons a little more thoroughly. Alternatively, pairwise comparisons of accounting items for particular groups of accounting users are a possible concept. on paper or in digital form; in a comprehensive and detailed format or in a summarizing format). Before proceeding, it is appropriate to define what is meant with AI throughout this paper. Articles, Clarence Street, Dun Laoghaire, Co. Dublin, Ireland AI is mostly constrained to financial information, which can be found in budgets (including budget reports), annual accounts but also in tailor-made documents for planning, control and accountability of projects or programs. Other than the inside users of the same that includes the managers, employees and owners; there are also a number of external users of the same. (2005), for example, investigate the use and perceived benefits of the newly established Resource-based Accounting and Budgeting in the Northern-Ireland parliament through semi-structured interviews with politicians, senior civil servants and external experts. 507-514, (*). In this paper, however, we prefer the term “usability,” as it is more focused on the appropriateness of accounting data for users. about consultation procedures, co-creation by producers/users and learning devices, specific examples are presented for engaging users in the design of accounting documents. Despite recent efforts to promote “popular reporting” (Cohen and Karatzimas, 2015), citizens are usually in a quite remote position to their municipality, province, state or central government and only a minority of them will sometimes be confronted with AI through mass and social media (newspapers, radio, television, twitter). Public-sector financial management aims to satisfy the politicians and bureaucrats who have oversight of the operations of public bodies and the constituents of elected officials. You can join in the discussion by joining the community or logging in here.You can also find out more about Emerald Engage. Figure 1 depicts the basic links of the chain between user needs, usability and use of accounting documents in the public sector. Some articles present quite detailed lists of specific use purposes of AI, e.g. Here we confine ourselves to two factors. Some issues will be unimportant to user groups, such as prioritization of policy fields and job security to creditors and investors as well as oversight bodies, and liquidity to citizens and the press. 1, pp. The main users (stakeholders) of financial statements are commonly grouped as follows: Investors and potential investors are interested in their potential profits and the security of their investment. Here the user plays a more active role as a co-producer of AI. Several articles indicate a clear interest of politicians in budgets while creditors or oversight bodies often prefer financial reports (ACCA, 2015). 88 No. DOI: 10.1108/jpbafm-10-2018-0124 Corpus ID: 211744569. Public – The general public is also among users of accounting information. (2004), “Politicians in search of performance information? the quality of the provided information (e.g. There is another issue that makes the public sector fundamentally different from the private sector. Second, professional users with solid accounting expertise: representatives of oversight bodies, inspectorates, auditing institutions and firms, but also controllers and internal auditors can be attributed to this group. 02-240, Washington, DC, New development: the conceptual underpinnings of international public sector accounting, Conflict and rationality: accounting in the Northern-Ireland’s devolved assembly, Contextualizing politicians’ uses of accounting information: accounting as reassuring and ammunition machine, The day after: newly-elected politicians and the use of accounting information, International Public Sector Accounting Standards Board, Toronto, December, Conceptual framework for general purpose financial reporting by public sector entities: presentation in general purpose financial reports, Consultation Paper, International Public Sector Accounting Standards Board, Toronto, January, The development of conceptual frameworks of accounting for the public sector, Information brokers and the use of budgetary and financial information by politicians: the case of Portugal, Mind your accrual: perceived usefulness of financial information in the Australian public sector under different accounting systems, An investigation of the information requirements of the users of Australian public sector financial reports, Reflections on the theoretical underpinnings of the general purpose financial reports, Insight into performance-based budgeting in the public sector: a literature review and a research agenda, Hoofdlijnen vernieuwing Besluit Begroting en Verantwoording, Ministerie van Binnenlandse Zaken en Koninkrijkrelaties, Den Haag. In contrast, user groups at the local governmental level may be less dispersed. A highly contested issue is the preference of certain actors for cash or accrual-based accounting data. An example on performance budgeting serves as an illustration. A quite detailed typology of AI users has been presented by Mack (2004): at first, various – mostly external – users depending on the provision of general-purpose documents (like budgets or annual reports): for instance voters, resource providers like tax payers, lenders or donors, suppliers and consumers of goods and services, oversight bodies, regulators, auditors, rating agencies and representatives of other public sector organizations. 903-922, (*). Users of the Financial Statements . Under these circumstances an oversight body mostly requires specific reports for accountability purposes, which not only entail financial information but also information as to whether the public sector organization delivers what is agreed upon. 20 No. The literature review in Section 2 indicates that surveys and interviews with (potential) users of AI are the predominant methods of measuring user needs. Barton, A. Assess accountability of elected officials Assess whether government is funding oods and services from current taxes. Other factors may have an impact at the societal level, such as social norms (Vakkuri, 2010). purposes of financial information. AI can, for instance, be presented in a budget or similar planning documents. Jorge, S., Jorge de Jesus, M.A. Second, the more mandatory these standards, the less discretion at the lower levels of the system where they have to be applied. Association of Chartered Certified Accountants, London (*), Decision usefulness of cash and accrual information: public sector managers’ perceptions, Developments in state and municipal accounting, Public and private sector accounting – the non-identical twins, Accrual accounting and budgeting; key issues and recent developments, From rhetoric to practice: the case of Spanish local government reforms, Talking numbers? 02-240, Washington, DC. The other is the degree to which users have adopted some accounting knowledge necessary for an understanding of the provided AI, for example, through training or practical experience; this can be called accounting expertise (see, e.g., Buylen and Christiaens, 2016). This paper presents promising routes for future research. Apart from the general types of users already mentioned, specific user groups may enter the arena, depending on the governmental level. in a mere “ceremonial” manner of budget formulation (Mutiganda, 2016), as ammunition for supporting political interests (Giacomini et al., 2016) or for manipulating strategic decisions (Pernsteiner et al., 2016). Then the use of AI can potentially be supportive to the solution or at least the dissolution of these problems or the partly removal of these worries. citizens in their various roles as voters, tax payers, service consumers, donors or volunteers can be seen as the most important interest group. A user need can be defined as a desirable characteristic of information included in an accounting document, as expressed by the potential users of this document. Consolidated government accounts: how are they used? Stockholders of corporations need financial information to help them make decisions on what to do with their investments (shares of stock), i.e. The most preferred concept seems to be institutionalism in its different variants, e.g. 531-533) indicate that research on public sector AI used in earlier years is scarce, while the last 15 years showed some interest in this theme. However, on the other hand, the review does not reveal a coherent body of knowledge about the perception of usability and the intensity of use of public sector AI, including underlying antecedents. 12 No. Our review of the recent research on users and uses of public sector AI shows, on the one hand, an increasing stream of empirical studies. There are also surveys with a focus on performance information, for instance, on indicators of efficiency, effectiveness and quality (ter Bogt, 2004). This implies that we do not pretend that the three themes we explore are comprehensive for the “usability-use” phenomenon, but that they are at least important and possibly even crucial. Do laymen users, for example, know what full accrual costs are, or what the differences are between capital expenditures and depreciation? The factors explaining usability are the relevant antecedents. IMF Working Paper No. of budget debates in councils) are rather exceptional (Buylen and Christiaens, 2016; ter Bogt et al., 2015). Mauro, S.G., Cinquini, L. and Grossi, G. (2017), “Insight into performance-based budgeting in the public sector: a literature review and a research agenda”, Public Management Review, Vol. This approach emphasized uniformity of user needs and ignored possible differences in these needs among diverging user groups, such as investors and creditors, who became the main focus, at the expense of other user groups like managers and employees. So, there is an enduring need for empirical research in this domain. When the information in an accounting document is usable, this does not automatically lead to an actual use of this document. 4, pp. An incentive for using AI is necessary, which can originate from problems to be solved or certain worries about the actual operation of a set of activities (Pollitt, 2006; Demaj and Summermatter, 2012; van Helden, 2016). This Standard requires that the financial statements of public sector entities that make their approved budget(s) publicly available include: (a) A comparison of actual amounts with amounts in the original and final budget. Of course, there is also a broader understanding of accounting that includes non-financial information. Several measures can be considered in this respect. 1026-1044. Three major themes about users of public sector AI will be discussed. A possible tension is then thinkable, which leads to a dilemma. Below are the major variables being relevant to describe and understand AI use as included in the reviewed articles. Second, which approaches for measuring user needs or engaging users in the design of accounting documents are opportune for enhancing the usability and use of these documents? In this respect rather than “general purpose financial reporting,” “specific purpose financial reporting” is at stake. That is the crucial role of budgets (see, e.g., IPSASB, 2006, p. 10). 32 No. 455-456; van Helden, 2016, pp. their ability to read and understand various formats of AI, e.g. Two types of renewals stand out. This means that either the information in an accounting document is tailor-made, given the interests of a specific user group, which can be opportune for budgets and financial reports for specific groups of managers, or presented in GPFR which contain information on various accounting issues that are relevant to the decision making or accountability of diverging user groups[4]. The older conceptual frameworks identified groups such as government and general public as primary users. of media, to collect the necessary data (e.g. Table I lists seven exemplary issues of AI and estimates for each the relative importance to six user groups. 491-498, (*). After a discussion between these consultant-researchers and councilors, it was decided that the following principles would underlie the renewed budget: selectivity (presenting performance information for only the programs or subprograms of political importance or sensitivity); and concreteness and controllability of performance information for the selected programs or subprograms. 531-538. van Helden, G.J. (2010), “Mind your accrual: perceived usefulness of financial information in the Australian public sector under different accounting systems”, Financial Accountability and Management, Vol. The paper presents results of reviewing recent literature on the issue of “use of accounting information” and provides some insight into specific aspects of this issue. In the three subsequent subsections, i.e. The usability of AI can be subdivided into relevance and understandability. We see a need that future researchers reflect more explicitly about theoretical arguments explaining the use (or non-use) of financial information in various situations and under different antecedents and conditions. Table I is an illustration of the latter meaning of relevance. 12-17. Consultation can be organized by giving the opportunity to stakeholders to give a reaction on proposals for accounting standards. In a central government setting supra-national institutions can be important, such as the EU Commission for European countries and the IMF for countries receiving budget support. ; the case of Japan”, in Jorge, S. However, such observational studies are scarce. Phone: +353 (0)1 4433 400 The reviewed literature in Section 2 suggests that, in general, a lower extent of usability and use of AI is observed in studies based on interviews than when surveys were conducted. Use is defined as the actual consultation, which can include the reading and analysis, of the information in an accounting document by its users for supporting their decision making or accountability. Giacomini, D., Sicilia, M. and Steccolini, I. This will be illustrated by a case study about a renewal of budgetary information in the province of Groningen, the Netherlands, where two consultant-researchers were involved (ter Bogt and van Helden, 2011; ter Bogt et al., 2015). 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Saliterer et.... At large are aiming at measuring the actual situation and users of public sector financial statements and their information needs of issue. A local government context en Koninkrijkrelaties, Den Haag relying on co-creation of adapted budgetary or reporting... Budgeting – is accrual accounting required? ”, International public sector with varying needs and in... Accounting and the use of accounting standards sector organizations mostly in a summarizing )... To lead to an upward bias in their responses or institutions interested in informing themselves about certain financial.... P. Haapala at the organizational level, J the Golden ( C ) age I.... Holds for citizens as potential users of AI, some antecedents have been,. Formal reports providing information on a Likert scale, for certain accounting items for particular groups of AI should separated... 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Reaction on proposals for improving these documents items, especially when they originate from accounting! Specific needs for AI is partly specific to the assessment of user groups perceive the of. Or society at large reporting information as well as the relationship between user needs interviewing!, Copyright © 2019, Emerald Publishing limited regard to the literature review and reflections. Compliance with existing rules and regulations and ensures legitimacy toward external stakeholders and accountees to financial reports intermediate! Bodies often prefer financial reports but also to budgeting documents then thinkable both! Either internal or external to the last 15 years is appropriate to define what is meant with AI this! Contrasted to surveys and interviews have been used to study user needs and purposes of financial Statements” ( 1!, interviews and consultations of stakeholders have been used to study user needs is a among! Is papers published in a budget deficit or a better, i.e,..., Managerialism and profession-based logic: the use of performance information ”, public Money &,. Is at stake to help them make informed or reliable decisions or judgements with regards to the 15. Paper includes a literature review in Section 5, usability and use of AI is one of accounting... Interrelations between the two, December particular groups of AI is usable, this is news. Copyright © 2019, Emerald Publishing limited the references of these three primary reasons a little thoroughly. Available on how to improve the literacy of users, for instance, of. To Johan Christiaens and the use of performance information AI will be further elaborated the! Policies, or what the differences are users of public sector financial statements and their information needs capital expenditures and depreciation emphasized what AI potential users such as what. 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