1.1 has become an essential resource for any

Background of the study

to the markets and commerce globalization, geological extension and the more prominent request for data and straightforwardness among investors, stakeholders, creditors,
suppliers, speculators,
partners and society in common,
showcase specialists discover their foothold in the
quality of financial report and their primary source
of information on company technique
(IASB, 2008).

According to Jonas and Blanchet
(2000),financial reporting is not only a final output; the quality of this
process depends on each part, including disclosure of the company’s
transactions, information about the selection and application of accounting
policies and knowledge of the judgments made. Financial information issued by a
company has become an essential resource for any market participant, since it
provides a reduced amount of information asymmetries between managers,
investors, regulatory agencies, society and other stakeholders. Therefore, one
of the main questions that arise about the quality of financial reporting is determination
of its factors.


In addition to above concept the main objective of Financial
reporting to provide information an the entity’s financial statements, which is
useful for making economic decisions (FASB, 1999; IASB, 2008). Providing quality financial reporting Information is
Important because it will positively affect capital providers and other
stakeholder in making investment, credit And resource allocation decision at
improving the efficiency of the overall market (IASB, 2008)






of the above fact, according to the article of Andra.M(2014) the quality of
financial statements is not an indicator that can be easily quantified, as it
cannot be observed directly, being based on the perception of the users of
financial information. Each category of users has its own expectations and
perceptions regarding what information is useful and of good quality.


different user groups will have dissimilar preferences, perceived quality will
deviate among constituents. In addition, the users within a user group may also
perceive the usefulness of similar information differently given its context.
As a result of this context and user-specificity, measuring quality directly
seems problematic (Botosan, 2004). Consequently, many researchers measure the
quality of financial reporting indirectly by focusing on attributes that are
believed to influence quality of financial reports, such as earnings
management, financial restatements, and timeliness (e.g. Barth et al.,
2008; Schipper & Vincent, 2003; Cohen et al., 2004).


we come to financial reporting frameworks and standards, in 2002 on the basis
of the Norwalk Agreement, two organizations: Financial Accounting Standards
Board (FASB) and International Accounting Standards Board (IASB) started joint
works so as to establish new accounting standards. These works among others led
to a change in the Conceptual Framework for Reporting, which is a kind of
„guide” and „base” for International Financial Reporting Standards. The
Framework specifies the main objectives and the principles of drawing up
financial reports as well as their qualitative characteristics. The changes
introduced in the years 2008 and 2010, referred to as the Improved Conceptual
Framework for Financial Reporting, are in particular related to the qualitative
characteristics of financial information presented in financial statements and
reflect the „new philosophy” of a financial statement.


The ultimate purpose of the Committee of the
International Accounting Standards Board (IASB) is to create high quality
standards in order to create quality financial statements. To achieve this
objective, the Commission establishes standards that lead to the increase in
the degree of relevance, faithful representation, comparability, timeliness,
verifiability and understandability in financial statements. The Commission
stresses that the financial statements must reflect the specific
characteristics, as defined by the Conceptual Framework, so that the
information which is provided is useful.


particular, the qualitative characteristics that are found in the Conceptual
Framework are divided into fundamental and enhancing. The two fundamental
characteristics are the relevance and faithful representation (i.e. an
alternative definition of reliability), and the enhancing are the
comparability, timeliness, understandability and verifiability. The main
difference between the fundamental and enhancing characteristics is that the
enhancing characteristics cannot single-handedly generate useful information.
As already mentioned, the IFRS creates the standards as well as the Conceptual
Framework, essentially aiming in producing higher quality financial statements.
The critical question that arises is whether this goal has been achieved; that
is, whether the financial statements following the IASB adoption are in fact, of
higher quality or not that
taken from the article of Kythreotis(2014).


In spite of the fact that
both the FASB and IASB stretch the significance
of high-quality budgetary reports, one of the key issues found in earlier writing is how to operationalize and measure degree this quality. Since of its
context-specificity, an observational evaluation of budgetary announcing quality definitely incorporates inclinations among a horde of constituents (Dechow and Dichev, 2002; Schipper and
Vincent, 2003; Botosan, 2004; Daske and Gebhardt, 2006).

primary aim of the present study is to determine the factors that affect
financial reporting quality of Commercial Banks of Ethiopia (public and private
sectors).For this reason the current researcher will attempt to determine the
factor that are affecting financial reporting quality by emphasizing on both
financial and non-financial information of given banks through benchmarks  of the fundamental characteristics (i.e.
relevance and faithful representation) and the enhancing qualitative
characteristics (i.e. understandability, comparability, verifiability and
timeliness) as defined in the ED (IASB, 2008).


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