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Volume :15 Issue : 60 1989      Add To Cart                                                                    Download

ACCOUNTING POLICY IN LIGHT OF THE AL-MANAKH CRISIS

Auther : Prof. Ali M. Abdel Rahim and Dr. Haider Al-Jummah

 

         AL-MANAKH crisis, the collapse of the unofficial Kuwaiti Stock Market has dominated Kuwaiti Economy since 1982.  The size of the crisis was more than four times the Gross National Product of Kuwait.

        This paper examines the accounting angle of the crisis: the accounting policies used by a sample of Kuwaiti and Gulf companies with the object of determining the effect of the crisis on the companies studied, evaluating the accounting policies used and determining the role of the auditors.

        Eighteen companies were studied and analyzed for the period 1981 through 1984.  Five auditors were interviewed, the role of the Ministry of Commerce and Industry, and that of the auditors were evaluated.

        Lack of Kuwaiti accounting and auditing standards, gap in the law, fictitious companies, easy credit and absence of effective government control contributed to the crisis.  Thus, speculation on the stock market became a major objective of many companies.

        In most cases, management did not adhere to the companies’ goals and objectives, accountants did not form sufficient provisions and reserves and auditors did not qualify their reports.

 

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