Assessment of the Quality of Financial Statements of Government-Owned Enterprises in Bosnia and Herzegovina




quality of financial statements, government-owned enterprises, audit report, supreme audit institution, violation of provisions of IAS and IFRS


The subject of this paper is the assessment of the quality of financial statements of public enterprises in Bosnia and Herzegovina based on the information contained in the audit reports of the supreme audit institutions. The aim of the research is to determine how often auditors indicate that financial statements are not of satisfactory quality. Furthermore, the goal is to determine which International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) are most often violated for the purpose of accounting manipulations and distorting the picture of the real performance of these enterprises. The research was conducted on a sample of 135 audit reports related to the reporting periods from 2018 to 2022. The method of content analysis was used to collect data. The results of the research show that in over 80% of cases the auditors gave a modified audit opinion indicating that the quality of the financial statements is not at a satisfactory level. Most of the reasons for modifying the audit opinion relate to noncompliance with the provisions of IAS 1, IFRS 9, IAS 36, IAS 16, IAS 37 and IAS 2. In most cases, public enterprises manipulate accounting information by not assessing the impairment of fixed and current assets and reducing the value of this property to a recoverable amount. Because of this, the value of the assets is overestimated, the expenses are underestimated and the financial result is overestimated.


Aguguom, T. A., & Ebun, O. (2021). Financial reporting quality and economic value added of listed companies in Nigeria. Augustine University Journal of Social Sciences, 1(1), 13-30.

Aljinovic Barac, Z., Vuko, T., & Šodan, S. (2017). What can auditors tell us about accounting manipulations? Managerial auditing journal, 32(8), 788-809.

Chaney, P. K., Faccio, M., & Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of accounting and Economics, 51(1-2), 58-76.

Čegar, B., & Parodi, F. J. (2019). State-Owned Enterprises in Bosnia and Herzegovina: Assessing Performance and Oversight (IMF Working Paper 19/201). International Monetary Fund.

Demir, V., & Bahadir, O. (2014). An investigation of compliance with International Financial Reporting Standards by listed companies in Turkey. Accounting and Management Information Systems, 13(1), 4.

Ding, Y., Zhang, H., & Zhang, J. (2007). Private vs state ownership and earnings management: Evidence from Chinese listed companies. Corporate Governance: An International Review, 15(2), 223-238.

Đorđević, M., & Spasić, D. (2022). Modified audit opinion and earnings management in state-owned companies: Evidence from Serbia. Facta Universitatis, Series: Economics and Organization, 19(4), 285-296.

Gaynor, L. M., Kelton, A. S., Mercer, M., & Yohn, T. L. (2016). Understanding the relation between financial reporting quality and audit quality. AUDITING: A Journal of practice & Theory, 35(4), 1-22.

Herath, S. K., & Albarqi, N. (2017). Financial reporting quality: A literature review. International Journal of Business Management and Commerce, 2(2), 1-14.

Hope, O. K., Thomas, W. B., & Vyas, D. (2013). Financial reporting quality of US private and public firms. The Accounting Review, 88(5), 1715-1742.

Istrate, C. (2018). Financial auditing and financial reporting for Romanian state-owned companies–modified opinions and observations. Journal of Accounting and Management Information Systems, 17(4), 513-531.

Liu, Q., & Lu, J. (2003). Earnings Management to Tunnel: Evidence from China’s Listed Companies.

Malinić, D. (2015). The relevance of positional risks in creating development strategy: The case of government-owned enterprises. Ekonomika preduzeća, 63(1-2), 33-56.

Mbawuni, J. (2019). Assessing financial reporting quality of listed companies in developing countries: evidence from Ghana. International journal of economics and finance, 11(9), 1-29.

Milojević, M. (2018). The state of public enterprise financial reporting in Serbia. Economic Analysis, 51(3-4), 105-114.

Olmo Vera, J., & Brusca Alijarde, I. (2021). Audit of State-Owned Enterprises: The Most Relevant Areas of Risk. Business and Society Review, 18(2), 84-127.

Oruke, M., Iraya, C. M., Omoro, N. O., & Otieno, L. O. (2021). The Impact of Audit Committee Diligence on Modification of Audit Opinion: State Owned Enterprises in Kenya. Research Journal of Finance and Accounting, 12(6), 110-116.

Robu, I. B., & Istrate, C. (2015). The analysis of the principal components of the financial reporting in the case of Romanian listed companies. Procedia Economics and Finance, 20, 553-561.

Rudžionienė, K., & Guptor, M. (2019). Financial reporting quality in Lithuanian state-owned enterprises. Science and Studies of Accounting and Finance: Problems and Perspectives, 13(1), 38-46.

Tang, Q., Chen, H., & Lin, Z. (2016). How to measure country-level financial reporting quality? Journal of Financial Reporting and Accounting, 14(2), 230-265.

Transparency International Bosna i Hercegovina. (2024, february 23). Baza javnih preduzeća.

Vučković Milutinović, S. (2019). Analysis of modifications to auditor’s opinion on financial statements of listed companies in Serbia. Ekonomika preduzeća, 67(3-4), 212-223.

Wang, J., Aharony, J., & Yuan, H. (2010). Tunneling as an incentive for earnings management during the IPO process in China. Journal of Accounting and Public Policy, 29(1), 1-26.

Wang, K. T., & Shailer, G. (2018). Does ownership identity matter? A meta-analysis of research on firm financial performance in relation to government versus private ownership. Abacus, 54(1), 1-35.

Wang, L., & Yung, K. (2011). Do state enterprises manage earnings more than privately owned firms? The case of China. Journal of Business Finance & Accounting, 38(7-8), 794-812.






Preliminary Annoucement

How to Cite

Assessment of the Quality of Financial Statements of Government-Owned Enterprises in Bosnia and Herzegovina. (2024). Acta Economica, 22(40), 145-160.

Similar Articles

1-10 of 205

You may also start an advanced similarity search for this article.