Virtual Booth

Financial Reporting Quality (FRQ) plays an important role in strengthening corporate transparency, investor confidence, and the sustainability of governance within capital markets. Despite increased ESG reporting practices and stronger regulatory oversight, concerns about earnings manipulation and weak financial reporting integrity persist among Malaysian Public Listed Companies (PLCs). Existing ESG and governance assessment tools primarily focus on sustainability disclosure and compliance scores, while paying limited attention to the quality of accounting information and governance-related reporting risks. These issues highlight the need for a practical tool to evaluate financial reporting integrity and identify governance factors associated with reporting quality.

This innovation introduces AQ-Pulse: Financial Reporting Quality Risk Detection System, an interactive dashboard prototype designed to assess financial reporting integrity using Accrual Quality (AQ) as the main indicator of financial reporting quality. The system applies the Dechow and Dichev (2002) model, with the modifications by Francis et al. (2005), to evaluate how closely accounting accruals are supported by operating cash flows. AQ-Pulse integrates governance and monitoring indicators, including Related Party Transactions (RPTs), Board Gender Diversity (BGD), Expanded Audit Reporting (EAR), ESG performance, leverage, and firm size, into a unified diagnostic dashboard.

Using a structured scoring and risk classification approach, the system generates AQ integrity scores, FRQ risk indicators, governance analytics, ESG moderation analysis, and anomaly alerts. A key feature of the innovation is the ESG–AQ contradiction analysis, which identifies companies with strong ESG performance but weak accrual quality, potentially signalling cosmetic governance or hidden reporting risks. AQ-Pulse transforms financial reporting research into a practical governance-monitoring tool for regulators, auditors, investors, and corporate stakeholders, while supporting stronger transparency and governance practices in Malaysian capital markets.

Keywords: Financial Reporting Quality, Accrual Quality, ESG Performance, Governance Analytics