Literature ReviewGrowth in the GCC and UAE Hospitality Industry In the recent years the hospitality industry in the GCC and UAE region has depicted significant growth. Despite the negative influence on the world economy pertaining to the crashing of the financial and securities market, the hospitality industry specifically in the UAE and FCC has reported increased growth and incremental revenues. The region has seen significant investment by local enterprises, as well as international hotel chains that have helped attract increasing number of tourists into the region. The hospitality industry is largely dependent on the marketing of the region as a tourism destination, as well as the openness of the culture in terms of hospitality.
The creation of free zone in Dubai has helped the UAE based tourism and hospitality industry to thrive providing increasing business opportunities in the hotel industry. The specific managerial support and accounting practices reflect the growth in the industry. Accounting and Financial Management Systems in the IndustryThe types of accounting practices adopted and the financial management systems employed in any industry are largely dependent on the industry itself, as well as on the rules and regulations of the country (Chand, 2005).
The regulatory board in the country or region provides an outline of what practices specific to the management of accounts and reporting of these accounts is to be employed under set criteria. As organization behavior theories have set forward, organizational culture is largely dependent on the external culture of the country in which the business operates. External influences from the cultural environment as a result have a significant effect on the business practices of ventures and firms in an industry.
However while the relationship between the country culture and the business practices respective to the region and industry is indirectly related the accounting practices and the relationship to the culture of the region in almost directly related as depicted by HassabElnaby and Mosebach (2005) and in research. Other factors that influence the accounting practices and adoption of financial management policies in an industry specifically also depend on the economic conditions and characteristics of the country. In regions where the economy is complex and highly developed, based on complex products and services, the ensuing accounting practices that are employed are also complex and highly strategic (Choi and Mueller, 1984).
In those countries however where the economy is relatively basic and simple, or in a slow growth phases the accounting practices that are employed and allowed for are simple ones. However it is possible for the accounting systems employed in countries with simple economies to evolve and develop over time, as the changes in the economy reflect changes in the respective industries. Aside from these factors, it is significant to note as well that adoption of accounting practices can also be dependent on business specific attributes.
These pertain to the size of the business and its operations, the scope of the operations and the level of internationalization involved. Relationship between Organization Size and Accounting PracticesIt is highly possible for different sized firms in the same region and industry to adopt differing accounting practices. This is because the selection of the accounting practices reflects the values and business practices of the organization. Similarly they are also employed to support the business operations.
Through their work Abeysekera and Guthrie (2003) have provided reasons for this, and they explain that when it comes to using methods of accounting in an organization, the management selects the option which is most suitable as per their business operations. It is further provided that businesses that operate on a large platform and serve a significantly large market tend to adopt more formal and complex accounting practices as opposed to SMEs and small firms (Abeysekera and Guthrie, 2003). This stand particularly true for such businesses regarding financial reporting to stakeholders and disclosure of business accounts to external parties, with smaller firms employing simpler practices of accounting and disclosure and larger more comprehensive businesses employing more evolved practices (Andrew et.
al. , 1989) as they have more resources to employ such practices and develop them further for efficient and more practical reporting. This concept is further explained by Zarzeski (1996) who depicts that the larger the firm or business is, the more stakeholders it has and therefore more demand in the public for its disclosure. As a result larger firms tend to adopt more complex accounting practices which are supported by related disclosure policies.
In order to practically provide evidence for this concept Street and Gray (2002) conducted a research to determine how the size of the business impacts the compliance of the organization with formal accounting regulations and legislature, and the findings provided that larger firms in an industry tend to have a more positive relationship with compliance with regulations and standards like IFRS and GAAP.