The Expected Impact of Strict Obligation to Apply Going Concern

Assumption (GCA) on Enhancing the Entity's Ability to Withstand the

COVID-19 Pandemic: Applied Research on Entities that May Exit from

the Market in Jordan

WALID OMAR OWAIS

Accounting and Accounting Information System Department

Amman University College for Financial and Managerial Science

Al-Balqa Applied University

P.O.Box 960958, Code 11196, Amman

JORDAN

MARWAN MOHAMMAD ABU FADDA

AL Quds Open University

STATE OF PALESTINE

Abstract: This study has the aim of looking at the expected impact of strictly obligation to apply going concern

assumption-GCA; on enhancing the entity's ability to withstand the COVID-19 pandemic with its consequences

and results. It is applied on entities that may exit from the market in Jordan. An electronic questionnaire (online

questionnaire) was prepared, established and developed for this purpose and published via Google Form by using

the simple random sampling method. A few months later, 399 fully answered electronic questionnaires were

received, and the extracted data was analyzed by the Statistical Program for Social Sciences (SPSS), and a number

of statistical tests were achieved, namely: the study tool's reliability, structural validity, the test for normal

distribution, the Multicollinearity test, the description of the study sample characteristics, and the descriptive

statistics for the study tool items. Each of the tests showed positive indicators.

The decision making base that states: (If Sig.T > 5% Accept Ho and If Sig.T ≤ 5% Accept Ha) was used, and it was

noted from the statistical analysis that: The Sig.T of the first sub hypothesis equals to (0.000). The matter that

confirms the acceptance of the alternative hypothesis; (accurate assessment of liquidity risks ‘Assets Risks’,

variable had the greatest impact on enhancing the entity's ability to withstand the COVID-19 pandemic). The

Sig.T of the third sub hypothesis appoints to (0.000). This proves the acceptance of the alternative hypothesis; (the

policy of deconcentration ‘business diversification’, variable came in the second place of effect on enhancing the

entity's ability to withstand the COVID-19 pandemic). The Sig.T of the second sub hypothesis equalizes (0.031).

This states the acceptance of the alternative hypothesis; (the impact of the accurate assessment of liquidity risks

‘financing risks’ variable came at the third place of effect on enhancing the entity's ability to withstand the

COVID-19 pandemic). So, the null state (Ho), of each sub-hypothesis was rejected.

The sole recommendation of this study is the strict application of the standards that rule any profession, or

occupation, especially in the accountancy occupation.

Key-Words: Going concern assumption, entity's ability to withstand, COVID-19 pandemic, assets risks, financial

risks, deconcentration.

Received: June 21, 2021. Revised: February 9, 2022. Accepted: February 23, 2022. Published: March 14, 2022.

1 Introduction

From the start, the COVID-19 pandemic presupposes

an unadorned economic and social shock for all

nations, and Jordan is no exception. With Jordan's

pre-pandemic declining growth and high young and

female unemployment rates, the shocks are frequent

and severe [27].

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Furthermore, projections show that Jordan's GDP

will decrease in 2020 for the first time in many years.

This is especially worrying given that, despite the

prolonged national and worldwide shocks to the

economy over the past 10 years, Jordan had

accomplished average growth of 2% before that

amounting to 44% of Gross Domestic Product

(GDP), even whilst putting a huge financial control

strategy to use. As such, this shrinkage is a clear

indication of the magnitude of the pandemic's impact

[12]. However, according to an assessment of the

World Economic Outlook for Jordan, which the

World Bank issued in June 2020, those negative

impacts have been projected to have an effect upon

various sectors including tourism, trade, services and

remittances [27].

Alongside the reopening of the economy, a

recent evaluation by the International Labour

Organisation, in partnership with the United Nations

Development Program and the Norwegian

Foundation for Labor Research and Social Studies,

showed that only half of the participating enterprises

had confidence in their ability to overcome the crisis

[13].

2 The problem Statement

“It did not keep and did not leave!” - this is the most

expressive expression of the reality in the global

economy due to the COVID-19 pandemic, which has

completed its first year, as many scientists and

epidemiologists believe it will stay with us to

infinity. Despite Jordan's outstanding health

performance since the outbreak of the pandemic, this

performance has had a high economic cost [21].

The pandemic is having a serious impact upon

micro and private businesses. Many are missing cash

reserves, funds, assets, and are unable to get credit to

help them deal with the serious problem [13]. The

negative factors that may affect the Jordanian

economy in light of COVID-19 pandemic can be

summarized as successive economic shutdowns,

disruption of commercial and tourist activities,

increased government spending, significant rise in

poverty levels, the potential for the Jordanian

economy to enter into a recession, the low levels of

Jordanian citizen's confidence in the national

economy and the feasibility of fiscal and monetary

policies [21].

A variety of these sectors had already faced

problems before the pandemic, with a quarter having

reported losses and almost half being hardly able to

cover their expenses. Few facilities were prepared for

the crisis, with only 25 percent stating that they had a

business continuity plan [13].

But what is the relationship between the

inabilities of entities (of all kinds) in Jordan to

confront the COVID-19 pandemic along with its

consequences, and the application of generally

accepted accounting standards (GAAS), especially

the GCA? Also, what is the GCA? GCA means that

the business unit will continue to operate maybe

forever or at least for an additional twelve months

[31]. If the company does not move forward, it is an

indication that it has declared bankruptcy and

liquidated its assets [15].

The auditor evaluates the company's capacity to

continue functioning for a term not exceeding one

year since the financial statements are audited [1].

Accordingly, for researchers, the main question that

summarizes the problem is ‘Can the strict and firm

application of generally accepted accounting

standards, especially the going concern assumption,

enable the entity to confront or withstand the

COVID-19 pandemic and its impacts, pressures and

threats, and consequently stay alive in the market?

This will be answered through the applied part of this

research.

3 Rationale of the Study

Familiarity is a powerful strength and considered to

be a final and decisive tool to reach correct solutions

and ends; it is a correct, clear and fair way to face

dangers, risks, and unknowns, no matter how diverse

or numerous they are, and is a powerful influence to

seize positive opportunities and favorable conditions.

There is intensity to remove negativity, abuse

and fragility to the point of overcoming them and

potential disaster. Aside from that, its mechanisms

improve positivity and activity, and maximize

welfare and interests.

However, pure familiarity may not bring the

maximum benefit from good, convenient, and

adequate acquaintance; the knowledge must be

accompanied by full sensitivity, simultaneous

attention and precise interpretation of the event. In

this study, certain factors were submitted for

investigation: an obligation to be applied, an accurate

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assessment of liquidity risks (assets risks and

financing risks) for undertaking and a policy of

deconcentration to be followed, to firmly support

the entity’s power to strongly withstand the

pressures and threats that have been imposed by the

COVID-19 pandemic.

The existence of these factors is a very

decisive matter in itself but the most important

question is whether we can elaborate them in such a

practical or operational equation to survive in the

market and to limit the COVID-19 pandemic and its

consequences. The higher the commitment, the

higher the resilience to the COVID-19 pandemic and

its consequences; this is the logic that forms the basis

of on this study and tries to validate that according to

the foundation of scientific research.

4 Goals and Reasons of the Study

The purpose of this study is to look at the anticipated

impact of the application of going concern

assumption on enhancing the entity's ability to

withstand the COVID-19 pandemic and its impacts;

it is applied research concerning entities that may

exit from the market in Jordan.

An interview with the General Manager of the

Industrial and Trade Records Department at The

Ministry of Industry, Trade and Supply [14]; showed

that the numbers of companies that closed their

commercial registration during the COVID-19 period

in Jordan were for 2019 (3699 companies), 2020

(1864 companies) and (2125 companies) up till

October of 2021.

This matter has caused a deep state of confusion

and there has been an inability to absorb it since it

had been assumed that entities in normal

circumstances take into account the ability to

continue in their operations for a full year or 12

months at least, without deciding to close or to exit

out of the market.

But most of the operating entities that exited the

market, from various market sectors in Jordan, did so

during the first three months of the start of the

COVID-19 pandemic, which brought about a state of

deep suspicion about the operational behavior of

these institutions, both in terms of adherence to the

strict application of the assumptions on which the

international accounting standards are based (in

particular the GCA), and in the provision of the

necessary requirements to continue in the market for

the longest possible period.

This includes the ability to continue in the

operations for the running of the entity for a

sufficient future period to fulfill the pledges made by

the entity for itself and to meet the obligations

achieve the goals that it has set for itself.

The same applies to the GCA in its two factors.

Factor one consists of liquidity risks, which are of

two types: a) assets risks, which are risks resulting

from the inability to trade in a security or a specific

asset quickly enough in the market to prevent the

occurrence of loss (or achievement of the required

profit); b) financing risks, which are those liabilities

that cannot be fulfilled when due, or they can only be

fulfilled at an unprofitable price. Factor two consists

of business risks, or the risks of non-diversification,

that are related to the focus of investments in a

particular business or section and that raise the risk

that investments will suffer significant losses if the

business or section faces serious financial problems

[23].

Effective diversification of investments across

different businesses and sections can significantly

reduce the effect of business risks, which are the

risks resulting from concentrating investments in one

or several small sectors that are known as ‘risks of

non-diversification’.

5 The Importance of the Study

Accounting applications are based on the supposition

that the entity will keep on its basic operations for a

reasonably long period of time in order to accomplish

its plans, accumulate its rights and meet its

commitments. These estimations represent the

entity's normal status, which is why the valuation

technique utilized in the financial statements is

chosen based on the GCA. GCA represents one of

the following forms: (a) The liquidation of the

company is not expected in the predictable future; (b)

The company will continue its normal operations

indefinitely.

However, with the rise of the COVID-19

pandemic in early 2020 and its transformation into a

global epidemic in a short period of time, and with

the negative effects that were reflected on the

prevailing economic systems as a result of the

measures imposed by various countries from closures

and prohibitions on various human activities and

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restrictions on land, sea and air travel, this

constituted a critical and delicate situation that

prompted many entities to close their doors and exit

the markets as a result of their inability to fulfill the

requirements for continuing their economic activities.

Expressed another way, economic activity was,

in effect, being halted by COVID-19. Based upon the

early forecast (2020a) of the IMF, there would be a

contraction of the global economy in 2020 of

approximately 3%. There is an expectation that the

contraction would be of a considerably greater scale

than was seen in the global financial crisis of 2008 to

2009. The estimate of the IMF (2020b) has been

revised to a drop for 2020 of 4.9% (June 2020).

According to the study, the revised forecast is

based on the following factors: i) higher perseverance

in socially alienated activities; ii) reduced activity

during curfews; iii) faster productivity drop among

businesses that have reopened for operation; and iv)

increased uncertainty [5].

Hence, the importance of this study springs from

the attempt of the trial to examine the impact of

commitment to applying accounting assumptions, in

general, and the GCA, in particular, on the possibility

of providing capacity to confront the COVID-19

pandemic which, in general terms, is an exceptional

case facing the activities of economic institutions.

6 Potential Benefits of the Study

This study, through the recommendations and results

that it can reach, may assist parties related to the

economic entity in terms of clarifying the constituent

elements of the GCA of the entity, and the expected

impact of commitment to its application on

enhancement of the entity's ability to face the

circumstances and challenges posed by the COVID-

19 pandemic.

Through its applied side, this study will present

the detailed components regarding the enforcement

of the GCA of the economic entity, and their

relationships to the strengthening of the ability

elements of the entity that are necessary to withstand

the effects of the COVID-19 pandemic and to avoid

the possibility of exit from the market as a result of

its inability to provide the necessary production

inputs to continue its economic activities, as well as a

result of the weak access to local and global markets

because of government measures aimed at impeding

the spread of the COVID-19 pandemic.

7 Literature Review

If the auditor or accountant has faith that the

company cannot continue to operate, then a

question arises of whether its assets are diminished,

and that may require a reduction in book value to

liquidation value. So, the value of the company

expected to be going concern is greater than the

value of its collapse, since the company can

continue to generate profits [2].

The GCA is used by accountants to identify the

sorts of reports that must be included in financial

statements. Going concern firms can postpone

reporting for non-current properties at their present or

bankruptcy value, but only at cost. When the sale of

assets does not ruin the firm's going concern, such as

shutting a minor branch office or relocating staff to

other divisions, the company has remained a

continuing concern [15].

In determining whether there are substantial

questions about a business's continuing concern, the

auditor considers the following factors: unfavorable

operating results, for example, a succession of

losses, corporate defaults, denial of the firm's trade

credit, and legal proceedings against the firm [2].

The following are some definitions of the going

concern assumption. The GCA is the presumption

that an entity will remain to operate in the near future

[2]. The GCA is an accounting term for a firm that

has the funding to keep running continuously until

proof of it differing is provided [15]. The GCA

assumes that the firm will recognize its assets and

satisfy its liabilities in the usual course of business

[3]. The GCA is what provides a company's capacity

to accumulate costs and prepay assets. The GCA is

an accounting assumption that wants businesses to be

accounted for as though they would remain in

existence in the future [20]. A company must know

how to function for a long enough period of time in

order to fulfill its obligations, duties, objectives and

so on [4]. GCA is an essential component in financial

accounting since many other accounting standards

are dependent on both; (a) the hypothesis that firms

will not simply vanish at the end of a given period,

and (b) the hypothesis that firms will not eventually

disappear at the conclusion of a period [20], on (c) on

the premise that, while an entity's financial

statements are being prepared, it will be presumed

that the firm has no plans to liquidate in the near

future [28], and (d) on the premise that whilst an

entity's accounting information is being prepared, it

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will be presumed that the firm has no plans to

liquidate in the coming years [30].

8. Hypotheses

8.1 Main Hypothesis

Possible indicators of going concern problems could

be summarized as follows: deterioration of the

liquidity position for a company that does not have

the backing of sufficient arrangements for financing;

financial risk at a high level that has arisen from a

gearing level that is increased which makes a

company have vulnerability to delay of payment of

interest as well as loan assumption; significant losses

in trading over several years; an aggressive strategy

for growth without the backing of sufficient finance

leading eventually to failure; a firm facing serious

litigations when lacking financial power for paying

potential compensation; the incapacity of a company

for production of new ranges of products of higher

value; and the bankruptcy of a client that is

significant to the company [3].

The (GCA) is exploited to ensure that available

business resources are utilized until companies are no

longer able to continue their activities. In order to

determine the necessary method to increase sales or

to reduce expenses. There are several conditions that

organizations must disclose in the event of their

inability to continue, such as continuous losses,

delays in repaying loans, and refusal of requests to

obtain credit. The ability of companies to continue as

a going concern is determined as follows:

Management Responsibilities: (GCA) is strictly

applied in times of economic crisis – such as the

global economic crisis resulting from confronting

COVID-19 measures – where the conditions required

to use continuity must be met.

Auditor’s responsibilities: The auditor’s

responsibilities are to obtain sufficient and

appropriate information regarding the use of (GCA)

in preparing the financial statements. The auditors

must identify the factors that indicate that the use of

(GCA) would be appropriate.

Reporting: One of the conditions for using the

(GCA) is to verify the financial statements that show

the inability of the establishments to continue

practicing their business, where the auditor relies on

the financial statements provided by the management

to determine the possibility of using the (GCA) from

not using it.

However, what if previous indications and

information were successfully addressed through

the entity and correct implementation of GCA has

been done? Does this matter provide the ability to

confront and withstand the COVID-19 pandemic?

These questions lead to the formulation of the main

hypothesis for this research as follows:

Ha: The strict obligation to apply the going

concern assumption (GCA) enhances the

entity's ability to withstand the COVID-19

pandemic.

8.2 Sub-hypotheses

8.2.1 First

High quality accounting principles must produce

the correct, trustworthy information for investors,

bankers, borrowers and others who make capital

allocation choices [19]. Higher quality accounting

and auditing procedures are related to the growth of

financial markets [8]. Similarly, improved quality

accounting standards lead to increased investor

trust [16]. This improves liquidity, lowers capital

costs, and allows for the establishment of fair

market pricing. The advent of such instruments

allows for the correct analysis of such goals as

liquidity risks. So, the formation of the first sub-

hypothesis of the liquidity risks, ‘assets risks’, was

reached, as follows:

Ha: The accurate assessment of liquidity

risks ‘Assets Risks’ enhances the entity's

ability to withstand the COVID-19

pandemic.

8.2.2 Second

Risk is a matter that is inherent for all commercial

organizations; indeed, for the successful running of a

commercial organisation, effective risk management

is a critical component. In regard to risk

management, the management of a company has

control to various degrees; there can be direct control

of some hazards, whilst other hazards can be largely

beyond the control of the management of the

company. Occasionally the most a corporation can do

is try to foresee prospective risks, analyze the

possible effect on the company's operations, and be

ready to respond to unfavorable occurrences [18]. So,

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we arrived at the formation of the second sub-

hypothesis which deals with the second part of the

liquidity risks, the ‘financing risks’, as follows:

Ha: The accurate assessment of liquidity

risks, ‘Financing risks’, enhances the

entity's ability to withstand the COVID-19

pandemic.

8.2.3 Third

Concentration risk is defined as any solitary (direct

and/or indirect) vulnerability or set of exposures

that has the potential to cause losses significant

enough to jeopardize an entity's health or capacity

to conduct its core operation [32]. The fact that the

(GCA) is formed of two parts: the liquidity risks

(assets risks, financing risks) and business risks

(deconcentration, diversification), means that we

must pay the same attention to each of them. So, the

third sub-hypothesis was formed as follows:

Ha: The policy of deconcentration

‘business diversification’ enhances the

entity's ability to withstand the COVID-19

pandemic.

9 The Field Study

9.1 Research Methods

The approach differs depending on the sort of a

study, its goals, fields and instruments. The

descriptive analytical approach (DAA) was used in

the current investigation, this process is followed by

putting down the results, then the researchers end

with expressing explanations.

The descriptive analytical approach (DAA) is

a “method properly represents certainty or

phenomena in quantitative or qualitative terms.

Qualitative expression describes and explains the

phenomenon's features. The quantitative expression,

on the other hand, provides us with a numerical

description of the amount or magnitude of this

occurrence, leading to findings or generalizations that

aid in comprehending the reality of the phenomenon

or situation” [22].

9.2 Sample and Population

The study population included all Jordanian

entrepreneurs and owners of small and medium-sized

businesses. An electronic questionnaire (online

questionnaire) was prepared and published via

Google Form using the simple random sampling

method. After more than 60 days, exactly 399

electronic questionnaires were received that were

fully answered.

9.3 Data Sources

To carry out the data collection process, this research

relied on secondary data, such as; suitable books,

convenient research literature, proper scientific

periodicals, and consistent specialized publications.

The scientific publications available on the Web Sites

were also used. The process of referring to the

various databases that serve this research was also

carried out. In order to complete the effectuation of

collecting the primary data, a questionnaire was

developed to examine the variables of the research.

The five-point Likert scale was used to finish the

statistical analysis of the data.

9.4 Reliability of the Study Tool

The results of the Cronbach’s alpha value, which was

employed to assess the internal reliability of the

research items' stability, are as follows:

Table 1. The coefficient value of Cronbach’s alpha for the items of the questionnaire

Variables

Ability to

withstand

components

Asset risks

Financing risks

Concentration

risks

Total indicator

Cronbach’s

Alpha

0.846

0.871

0.805

0.884

0.933

Number of items

Table 1 shows that internal consistency

coefficient (Cronbach’s alpha) for the study tool

paragraphs went between: 80.5 % to 88.4 %, and

had a stability degree of 93.3 % for all paragraphs.

According to [24], the minimal constancy

coefficient (Cronbach’s alpha) is 0.70, and the

nearer the number is to 1, i.e., 100 %, the better the

degree of stability for the research instrument. As a

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result, all of the internal uniformity factors

indicated in the preceding table are good signs of

the research item’s stability and reliability in

statistical analysis.

9.5 Structural Validity

The measurement of structural validity involves

measurement of instrument validity statistically with

assessment of the degree to which the objectives of

the tool are met, and whether or not the tool can

actually measure content that it was designed to

measure, through extraction of the correlation

analysis value (Pearson correlation).

The Pearson correlation is a reflection of the

degree to which the items of the scale attribute to

overall score for the axial direction. Also, it means

that there is differentiation of each paragraph

capability of the rating.

Paragraphs that are negative or that have

correlation coefficients that are lower than 0.25 are

considered low and ought to be removed, while items

that have correlation coefficients that are over 0.70

are seen as being unique [17]. The outcome of

structural validity is shown in Table 2.

Table 2. The correlation degrees of the scale items, with the total score of their axis

Ability to withstand

components

Asset risks

Financing risks

Concentration

risks

Item

Correlation

Item

Correlation

Item

Correlation

Item

Correlation

0.646

0.908

0.876

0.841

0.420

0.888

0.788

0.847

0.569

0.879

0.878

0.879

0.744

0.885

0.662

0.725

0.753

0.653

0.672

0.628

Table 2 shows that the correlation value for all

items in the research instrument is more than 25%

and has an extrusive (+) trend. This result is

regarded as constructively true since it is a signal of

excellence for all items on the scale.

9.6 Normal Distribution Test

Skewness has been retrieved, and this analysis is

used to assess the distribution's symmetry; a result

beyond 1 means that the spreading is significantly

skewed. The kurtosis number was calculated. If the

kurtosis number is equal to or less than 2.58 (at the

0.01 level) or 1.96 (at the 0.05 level), the distribution

is normal [7].

Table 3. Skewness and kurtosis tests indicate a normal distribution of data.

Hypothesis

Ability to withstand

components

Asset risks

Financing risks

Concentration risks

Skewness

0.012-

0.057

0.369-

0.112

Kurtosis

0.312-

0.691-

0.292-

0.634

The test results in Table 3 clearly demonstrate

that the data distribution was typical, since the

skewness results do not go beyond the range of 1.

At the 0.05 level, the value of kurtosis did not

surpass 1.96. The graphs below depict normal

distribution.

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DEP

5.00

4.75

4.50

4.25

4.00

3.75

3.50

3.25

3.00

2.75

2.50

2.25

2.00

Std. Dev = .59

Mean = 3.50

N = 399.00

IND

5.00

4.75

4.50

4.25

4.00

3.75

3.50

3.25

3.00

2.75

2.50

2.25

2.00

Std. Dev = .69

Mean = 3.45

N = 399.00

Fig. 1: The normal distribution of the study variables

9.7 Multicollinearity Test

Calculation was done of the variables of allowed

variation tolerance and the variance inflation factor

(VIF). It is shown in Table 4 that, after statistical

treatment (0.2), the allowed standard deviation value

for independent factors was larger than 2 and less

than 1. The variance coefficient for inflation was less

than 5; the indication, therefore, is that no strong

correlation exists between those independent

variables. The implication is that there is eligibility of

the values for the models of multiple regressions

[10].

Table 4. Test results of Multicollinearity

Variables

VIF

Tolerance

Asset risk

2.037

0.491

Financing risk

1.861

0.537

Concentration risk

2.022

0.495

Pearson correlation coefficients were utilized

among the extents of the explanatory variables to

check that there were no great multiple linear

correlations among the independent variables, in

order to validate the prior findings. The results are

shown in Table 5.

Table 5. Pearson correlation coefficient matrix for the independent variables

Variables

Asset risk

Financing risk

Concentration risk

Asset risk

1.00

Financing risk

0.621

1.00

Concentration risk

0.660

0.618

1.00

Table 5 reveals that the maximum relationship

among the independent factors is 0.660, which was

between the independent values (Concentration risk)

and asset risk), whereas the value of correlation

coefficient among all the other explanatory factors

were less than that. This implies no significant

multiple linear correlations among the independent

variables with values less than 1 (80 %). As a result,

the sample is free of the issue of excessive multiple

linear interactions [9].

This test ensures that the data is free of the

autocorrelation problem in the linear regression

which, if present, may reduce the model's

predictive power. This is validated by the Durbin-

Watson analysis, where its values vary from 0 to 4;

if the value of Durbin–Watson is from 1.5 to 2.5, it

shows no correlation among the independent

variables and that it is satisfactory. The findings of

this test are shown in Table 6, where it is apparent

that the Durban-Watson value obtained for each of

the study objectives was more than 1.5 and lower

than 2.5 at the level 0.05. This implies that there is

no Multicollinearity problem and that it is

appropriate for it to be used in the multiple

regression analysis [26].

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Table 6. The autocorrelation test (D-W) findings of the study hypothesis

Hypothesis

Ho.

Ho.1

Ho.2

Ho.3

The result

D-W

1.943

1.937

1.980

1.790

No autocorrelation problem

10 Characteristics of the Research

Sample

The findings of the frequencies and percentages of

basic information linked to the first section of the

study questionnaire are shown in Tables 7-A & 7-B.

The example responses are explained further below.

The general characteristics of the entities forming the

research sample were divided into two parts. The first

section contains general information about the

entities, which is included in Table 7 – A, and

consists of the following items:

Table 7-A. General information description

Variable

Category

Frequency

Sixth:

The company maintains liquidity in…

(1) Company fund only

140

35.1%

(2) Bank accounts

202

50.6%

(3) Actual investments

8.5%

(4) Mixed activities

(5) Other (specify): -----

0.8%

Total

399

100%

Seventh:

The company’s leadership enjoys the

following qualities and characteristics…

(1) Friendliness and

respect for all

18%

(2) Lack of arrogance

and self-conceit

10.3%

(3) Lack of self-love and

titles

(4) All of the above

271

67.9%

(5) Other (specify): -----

0.8%

Total

399

100%

Eighth:

The productivity of the company is

characterized as unrelated…

(1) With specific

working hours

317

79.4%

(2) With a fixed working

2.8%

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place

(3) With a specific work

mechanism

4.3%

(4) All of the above is

true

12.3%

(5) Other (specify): -----

1.3%

Total

399

100%

Ninth:

The company has a customer service

department that is characterized as…

(1) Excellent and quick

response

21.3%

(2) Solves problems

quickly

4.3%

(3) Qualified and trained

staff

11.8%

(4) All of the above is

true

247

61.9%

(5) Other (specify): -----

0.8%

Total

399

100%

The successful company is one that exercises

financial prudence and reinvests its money in the

business again [29]. The paragraphs in Table 7-B

represent the characteristics of successful entities.

The results of the frequency explanations were as

shown in the following sections.

10.6 The Existence of a Large Financial

Liquidity at the Entity

Any economic entity is based on the joining or

merging of activity — unity of life — in the pursuit

of a single purpose or business. Each legal entity in

an economic entity has committed itself and its assets

to the success of the joint enterprise [6]. To be among

the effective entities, the entity must have sufficient

liquidity cash in its bank account, outside of the

actual money invested within the entity, in advance

of any urgent situation that may occur unexpectedly;

so any entity that pursues long-term success must

have reserve money in its bank account. What equals

to 202 entities from the study sample admitted that

they maintain financial liquidity in bank accounts.

Meanwhile, 140 entities reported that they keep their

money in their cash box. Perhaps this is due to the

nature of the service activity, which necessitates the

availability of cash at the moment of demand.

10.7 Entity’s Leadership is Free from Feelings

of Arrogance And Self-Love

Part of what determines whether a company succeeds

or fails is how its founders think. The findings

revealed that different characteristics of

entrepreneurial activity have varying effects on

company success [11]. One of the characteristics of a

successful company is that its leadership enjoys

feelings of friendliness and respect for all, not

arrogance, self-conceit, self-love and love of titles.

Many company directors and founders tend to put

titles in front of their names, such as the CEO, the

head of the organisation, the head of the sales

department, the head of the customer department and

other different titles. This matter negatively affects

their relations with the employees working in the

entity as well as the clients. The client loves to deal

with a nice, friendly and well-behaved person, and

does not like to deal with an arrogant person. Exactly

271 entities from the study sample indicated that

their management is free of these negative feelings,

with the consequent positives that are reflected in

their performance in emergency conditions.

10.8 High Productivity is Not Linked to

Specific Working Hours and a Fixed

Place of Work

Successful entities cannot be classified as companies

that their work begins at specific hours, starting, for

example, at eight in the morning and ending at four

in the evening, with the employee performing

specific tasks every day without variety through

periods of time. Rather, high productivity is linked to

the provision of a great deal of freedom for

employees within the entity to perform the work

required of them, according to the mechanism(s) that

they find suitably comfortable for their performance.

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If the work is done from home in a more productive

and better way in all respects, then that is fine.

Exactly 317 entities from the research sample agreed

that they adhere to specific working hours regardless

of the place, which means that, during the pandemic,

it has been possible to work from anywhere such as

at home with use of the internet, as has actually

happened during the intensification of the COVID-19

pandemic.

10.9 Paying Attention to Quality of Customer

Service Department in the Entity

One of the hallmarks of successful entities is the

presence of an excellent customer service department

in them, which is quick to respond to customer

problems and solve them. The more qualified and

trained the persons of the customer department team

are, to answer customers' questions and solve the

problems that they face when seeking to benefit from

the services of the institution, the more the

organisation is ranked on the list of successful and

strong companies. Exactly 247 entities mentioned

that the customer service department in them has

characteristics that increase its quality and ability to

meet customers’ requirements.

11 The Descriptive Analysis of the

Study Variables Produced the

Following Results

11.1 Study Tool Item Descriptive Statistics

Arithmetic averages, standard deviation and variance,

rank, corresponding weights, and degree of approval

were computed to determine the sample members'

attitudes about the research axes. The following

equation was used to calculate the amount of relative

concordance:

Group extent = upper limit of the alternative

- minimum alternative / number of levels =

(5-1)/3 = 1.33.

If the sum of squares occurs between 1 and 2.33,

it is regarded as low. If it runs between 2.34 and 3.66,

it is deemed average, and if it surpasses 3.66, it is

considered high [25].

11.2 Characterizations of Study Sample

Members' Responses to ‘the Ability to

Withstand’ Components

Table 8 displays the mathematics mean, standard

deviation, corresponding weights, amount of

agreement, and level of the interviewees' responses to

the variable ‘The ability to withstand the COVID-19

pandemic, which was calculated based on 10

sentences.

Table 8. The respondents' replies' mathematics mean, standard deviation, relative weight,

degree of agreement, and level

Senten

No.

Sentence

Mathem

atics

mean

Standar

deviatio

Relative

weight

Degree

approva

Leve

(0.1)- The entity has sufficient

physical capacity [production

inputs] to continue operations

for a sufficient future period.

3.26

0.911

65.2

Medium

(0.2)- The entity has the

financial capabilities

necessary to fulfill the

commitments it made to third

parties.

3.68

0.898

73.6

High

(0.3)- The entity possesses the

material and moral elements

3.64

0.856

72.8

Medium

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[material, energy, and desire]

that enhance its ability to

fulfill the obligations it has

made on itself for others.

(0.4)- The entity employs the

human capital necessary to

effectively and efficiently

achieve the goals it has set for

itself.

3.47

0.926

69.4

Medium

(0.5)- The working human

cadre possesses the

appropriate scientific

expertise to implement the

plans and achieve the goals.

3.59

0.895

71.8

Medium

(0.6)- The human capital has

sufficient technical experience

to deal efficiently and

effectively with the current

conditions.

3.51

0.868

70.2

Medium

(0.7)- The entity is always able

to access the necessary

funding sources at a low cost

and appropriate deadline.

3.44

0.908

68.8

Medium

(0.8)- The entity applies a

management approach

[corporate governance] that is

characterized by robustness

and flexibility in the face of

any sudden market changes.

3.34

0.930

66.8

Medium

(0.9)- The entity's senior

management has strategic

thinking capable of predicting

what the future conditions will

be, and developing diverse

and effective plans to confront

them.

3.46

0.991

69.2

Medium

(0.10)- The entity's

management is aware of its

strengths and weaknesses, and

its competitive advantage that

enables it to manage

emergency crises in a way

that allows it to achieve its

goals.

3.56

0.935

71.2

Medium

Total Indicator

3.50

0.591

70%

Mediu

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According to Table 8, the total indicator has a

mathematics mean of 3.50 and a standard deviation

of 0.591, indicating attitudes of the research sample

associates toward (the ability to withstand the

COVID-19 pandemic) components were in the

normal level. Sentence 2, ‘The entity has the

financial capabilities necessary to fulfill the

commitments it made to third parties’ occupied the

first level with a mathematics mean of 3.68 and a

standard deviation of 0.898 and has the first degree

of approval. But Sentence 1 took the last place,

saying that ‘The entity has sufficient physical

capacity [production inputs] to continue operations

for a sufficient future period’ with a mean of 3.26, a

standard deviation of 0.911, with a medium degree.

We can explain this by mentioning that about 77.7%

of the study sample are service entities, and own

minimum physical production inputs.

11.3 Description of Study Sample Members’

Answers to (Assets Risks) Questions

Table 9 displays the arithmetic average, confidence

interval, corresponding weights, degree of consensus,

and rank of respondents' responses to ‘asset risk’, as

determined by 3 sentences.

Table 9. The averages, confidence interval, rank, corresponding weights, and degree of consensus with

regard to the asset risk categories are all calculated.

Sentence

No.

Sentence

Mathematics

mean

Standard

deviation

Relative

weight

Degree of

approval

Level

(1.1)- Most of the entity’s assets are

characterized by their ability to trade at

sufficient speeds in the market.

3.47

0.899

69.4

Medium

(1.2)- The entity's assets enjoy a sufficient

margin of profit to be able to absorb the loss

if it occurs.

3.40

0.935

Medium

(1.3)- The entity accumulates sufficient and

appropriate reserves to meet any possible

decrease in liquidity.

3.46

0.847

69.2

Medium

Total indicator

3.45

0.797

69%

Medium

Table 9 shows that the total indicator reached

mathematics mean of 3.45 with a confidence interval

of 0.797, indicating that the attitudes of the research

survey participants toward ‘Asset risks’ were on the

medium degree of approval. Sentence 11, which says

‘Most of the entity’s assets are characterized by their

ability to trade at sufficient speeds in the market’,

had first level with a mathematics mean of 3.47 and a

standard deviation of 0.899 and a medium degree of

approval. But Sentence 12, ‘The entity's assets enjoy

a substantial margin of profit to cover the loss if it

arises’, caught the final level with a 3.40

mathematics mean average, a 0.935 confidence

interval, and a middling degree.

11.4 Description of Study Sample Members’

Answers to (Financing Risks) Questions

Based upon 3 sentences; the standard deviation,

mathematics mean, relative weight, respondent

answer level and degree of approval with regard to

‘Financing risks’ are shown in Table 10.

Table 10. The mathematics mean, standard deviation, relative weight, degree of approval, and level

Sentence No.

Sentence

Mathematics

mean

Standard

deviation

Relative

weight

Degree of

approval

Level

(2.1)- The entity has sufficient provisions to

meet its obligations when they become due.

3.71

0.950

74.2

High

(2.2)- The entity is able to meet its obligations

even at an unprofitable price.

3.35

0.915

Medium

(2.3)- The Corporation maintains sufficient

cash reserves to cover emergencies.

3.64

1.005

72.8

Medium

Total indicator

3.57

0.812

71.4%

Medium

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Table 10 shows that the total statistic has

mathematics mean of 3.57 and a confidence interval

of 0.812, indicating that the research sample

associates' movements near ‘Financing risks’ were at

the normal level. With a mathematics mean of 3.71

and a standard deviation of 0.950, sentence 14, ‘The

entity has adequate provisions to pay its obligations

when they become due’, gained first place with a

high degree. The last position was taken by Sentence

15, "The company is able to pay its commitments

even at an unprofitable price’ with a mathematics

mean of 3.35 and a confidence interval of 0.915 of a

medium degree.

11.5 Description of Study Sample Members’

Answers to (Concentration Risks)

Questions

Table 11 displays the mathematics mean, confidence

interval, corresponding weights, degree of consensus,

and level of respondents' answers to ‘Concentration

risks’ based on 4 items.

Table 11. The average, confidence interval, corresponding weights, degree of agreement, and rank are all

measures of agreement.

Sentence

No.

Sentence

Mathematics

mean

Standard

deviation

Relative

weight

Degree of

approval

Level

(3.1)- The entity's investments vary in

different economic activities and sectors.

3.45

0.975

Medium

(3.2)- The entity's investments are distributed

over short, medium and long time periods.

3.29

0.862

65.8

Medium

(3.3)- The entity's investments are divided into

small, medium and large sizes.

3.35

0.863

Medium

(3.4)- The entity has updated plans to face any

major interruptions in work.

3.41

0.946

68.2

Medium

Total indicator

3.37

0.787

67.4%

Medium

Table 11 shows that the total statistic has

mathematics’ mean of 3.37 and a confidence interval

of 0.787. This implies that the study sample

associates' opinions about ‘Concentration risks’ were

moderate. The top rank was achieved by sentence 17,

‘The entity's investments differ between different

financial growth and sectors’, with a mathematics

mean of 3.45 and a confidence interval of 0.975 of a

medium degree. But sentence 18 performed at the

final level, which indicates that "The entity's

investments are spread throughout short, medium,

and long time periods’ with a mathematics mean of

3.29 and a confidence interval of 0.862 of a medium

degree.

12 Results of Testing Hypotheses of the

Study

12.1 The Result of the Main Hypothesis Test

In this section of the research, we look at the primary

hypothesis test, which was submitted to a multiple

statistical method and yielded the results presented in

Table 12.

Table 12. The multiple linear regression model's results for serious commitment to apply the sustainability

imposition of the institution's resilience to the COVID-19 pandemic

Dependent

Model summary

ANOVA

Coefficient

Adj.

Sig.

Variable

Std.

Error

Beta

Sig.T

The ability

withstand

0.82

0.682

0.680

282.952

0.000

3/395

Asset risks

0.435

0.030

0.587

14.518

0.000

Financing

risks

0.061

0.028

0.084

2.163

0.031

Concentratio

n risks

0.181

0.030

0.241

5.968

0.000

The results in Table 12 show a statistically

significant effect of the ‘The strict obligation to apply

the going concern assumption on enhancing the

entity's ability to withstand the COVID-19 pandemic’

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as demonstrated by Sig. F = 0.00, which is a smaller

amount than 0.05, and also by the calculated F = 282.952, which is bigger than its tabular value equals

to 2.60, i.e., (282.952 > 2.60).

The correlation coefficient's value (R), which is equal

to 82.6%, indicates that there is a strong relationship

between “The strict obligation to apply the going

concern assumption’ and ‘Enhancing of the entity's

ability to withstand the COVID-19 pandemic’.

The value of R2 equals 0.682, which means that

‘The strict obligation to apply the going concern

assumption’ can explain 68.2% of ‘The

enhancement of entity's ability to withstand the

COVID-19 pandemic’ variance.

According to the coefficients table results for the

first sub hypothesis, the variable of ‘The accurate

assessment of liquidity risks (Assets risks) had the

greatest impact, since its beta coefficient was 0.587,

and this result was aided by the calculated T value of

14,518, that is more than its tabular value of 1.96 and

at a significant level of 0.00.

Following the third sub hypothesis ‘The

deconcentration policy (Business diversification)

component’ came in second place, in terms of effect,

as its beta coefficient value is 0.241, and this result is

aided by the carefully calibrated T value of 5.968,

that is higher for the parametric significance at a

meaningful level (Sig.T = 0.00). Following that, the

second sub hypothesis ‘The accurate evaluation of

liquidity risks (Financing risks) variable was placed

third, in terms of effect, with a beta value of 0.084.

This impact is aided by the computed T value of

2.163, which is higher for the calculated value at a

meaningful level (Sig.T = 0.031).

So, there is rejection of the null hypothesis (Ho)

and the acceptance of Ha (the alternative hypothesis),

with demonstration of an effect, that is statistically

significant at 0.05 level, that ‘The strict duty to

implement the GCA improves the entity's capacity to

endure the COVID-19 pandemic’.

Additional analysis; If we use the decision making

base that states: (If Sig.T > 5% Accept Ho, and If

Sig.T ≤ 5% Accept Ha), we note from the table [12]

that Sig.T of the:

 First sub hypothesis equals (0.000). This confirms

once again the acceptance of the alternative

hypothesis and the rejection of the null

hypothesis.

 Second sub hypothesis equals (0.031). This

confirms once again the acceptance of the

alternative hypothesis and the rejection of the null

hypothesis.

 Third sub hypothesis equals (0.000). This

confirms once again the acceptance of the

alternative hypothesis and the rejection of the null

hypothesis.

12.2 Sub-hypothesis Test Results

The assessment of the sub-hypotheses, which were

submitted to a simple regression model, yielded

results as follows:

Table 13. The basic linear regression model's results for the sub-hypotheses

Hypothesis

Adj.

Calculated

Sig.

Std.

Error

Calculated

Tabular

Sig.

Result

Ha.1

0.798

0.637

0.636

398

696.811

0.00

0.592

0.022

26.397

1.96

0.00

Reject

Ha.2

0.597

0.357

0.355

398

220.247

0.00

0.435

0.029

14.841

1.96

0.00

Reject

Ha.3

0.680

0.462

0.461

398

341.058

0.00

0.511

0.028

18.468

1.96

0.00

Reject

Table 13 shows the results shown in the follows

sections.

12.2.1 The First Sub-Hypothesis Test's Outcome

(Ha.1)

It was discovered that ‘The accurate assessment of

liquidity risks ‘Assets Risks’ has a statistically

significant influence on improving the entity's

capacity to survive through the COVID-19

pandemic’, as the T value of 26.397 is larger than the

tabulated value that equals (1.96), and significant at

the level of 0.05. It should be highlighted that the

correlation coefficient R = 79.8 % indicating a

significant link between the two factors of the

equation. The coefficient of determination (R2 =

0.637) result suggests that ‘The accurate assessment

of liquidity risks (Assets risks)’ variable has

explained 63.7% of ‘The entity's ability to withstand

the COVID-19 pandemic’ variance. This means that

36.7% is attributed to random factors; (relevant to

political, geographic, demographic, other

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environmental and non-economic aspects) are not

included, or taken into account, when studying and

evaluating the assets risks.

Furthermore; if we use the decision making base

that states: (If Sig.T > 5% Accept Ho, and If Sig.T ≤

5% Accept Ha), we note from the table [13] that

Sig.T of the first sub hypothesis equals (0.000). This

confirms once again the acceptance of the alternative

hypothesis and the rejection of the null hypothesis.

12.2.2 The Second Sub-Hypothesis Test Outcome

(Ha.2)

It was discovered that ‘The accurate assessment of

liquidity risks, ‘Financing risks’, enhances the

entity's ability to withstand the COVID-19

pandemic’. Through T value of 14.841, which is

larger than the tabulated value that equals (1.96), and

meaningful at the level of 0.05, and since the value of

the correlation coefficient R = 59.7%, it indicates the

existence of a medium relationship between the two

variables. The value of the coefficient of

determination (R2 = 0.357) indicates that ‘The

accurate assessment of liquidity risks (Financing

risks) variable, explained 35.7% of ‘The entity's

ability to withstand the COVID-19 pandemic’

variance. This means that 64.3% is related to other

factors; (connected to political, geographic,

demographic, other environmental and non-economic

aspects) are not included, or taken into account, when

investigating and evaluating the finance risks.

So; by using the decision making base that states:

(If Sig.T > 5% Accept Ho, and If Sig.T ≤ 5% Accept

Ha), we note from the table [13] that Sig.T of the

second sub hypothesis equals (0.000). This confirms

once again the acceptance of the alternative

hypothesis and the rejection of the null hypothesis.

12.2.3 The Third Sub-Hypothesis Test Outcome

(Ha.3)

It was discovered that ‘The policy of deconcentration

(business diversification)’ has a statistically

significant effect on enhancing the entity's ability to

withstand the COVID-19 pandemic’, via the T value

of 18,468; so, it is higher than the tabulated form that

equals (1.96), and it has a highly significant level of

0.05. It is worth noting that the coefficient of

correlation (R = 68%, indicated a significant link

between the two factors. The value of the coefficient

of determination (R2 = 0.462) shows that ‘The policy

of deconcentration (business diversification)’

variable explained 46.2% of ‘The entity's ability to

withstand the COVID-19 pandemic’ variance. This

means that 53.2% is stick and to other variables;

(connected to political, geographic, demographic

other, environmental, and non-economic aspects) are

not included, or taken into account, when

investigating and evaluating the policy of

deconcentration (business diversification)’.

And; if we use the decision making base that

states: (If Sig.T > 5% Accept Ho, and If Sig.T ≤ 5%

Accept Ha), we note from the table [13] that Sig.T of

the third sub hypothesis equals (0.000). This

confirms once again the acceptance of the alternative

hypothesis and the rejection of the null hypothesis.

13 Conclusions

From the start, the COVID-19 epidemic has posed a

serious economic and social blow to all nations, with

Jordan being no exception [27]. Furthermore,

projections indicated that Jordan's economy will

contract in 2020 for the first time in years [12].

In Jordan, the negative impact is projected to

harm a variety of industries, including commerce,

remittances, tourism, and the services sector [27].

A recent assessment showed that only half of the

participating entities are confident of their ability to

overcome the crisis [13].

In this research, certain variables were submitted

to deep analysis, and it was proved that the higher the

commitment level of GCA application rises, the

higher the level climbs for withstanding against the

COVID-19 pandemic. The analyzed variables that

received deep investigations and testing are:

Assets Risks: As most of the entity's assets are;

characterized by their ability to trade at sufficient

speeds in the market, enjoy a sufficient margin of

profit to be able to absorb the loss if it occurs, and the

entity accumulates sufficient alongside with

appropriate reserves to meet any possible decrease in

liquidity.

Financing Risks: As the entity; has sufficient

provisions to meet its obligations when they become

due, maintains sufficient cash reserves to cover

emergencies, and is able to meet its engagements

even at an unprofitable price.

Concentration Risks: It was proved that each entity

is; possessing investments vary in different economic

activities and sectors, has updated plans to face any

major interruptions in work, the investments are

divided into “small, medium and large sizes”, and

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they are distributed over “short, medium and long

time” periods.

The statistical analysis indicates that there is a

significant effect of ‘The strict obligation to apply

the going concern assumption (GCA), on enhancing

the entity's ability to withstand the COVID-19

pandemic’ with all of its consequences and results.

Depending on the fact that each entity of the research

sample has:

 Adequate physical capacity to continue

operations for suitable future period,

 Pecuniary capabilities necessary to fulfill the

commitments it made to third parties,

 Dominating the material and moral elements

that enhance its ability to fulfill the

obligations that have been made for others,

 Recruiting the human capital necessary to

achieve the targeted goals,

 Controlling appropriate scientific expertise to

implement the adopted plans,

 Possessing fit technical experience to deal

appropriately with the current conditions,

 Faculty to access the necessary funding

sources at a low cost and convenient

deadline,

 Executing a management approach

characterized by robustness and flexibility to

counter any sudden market changes,

 Strategic thinking capable of predicting the

future conditions, and developing diverse

and effective plans to confront them,

 And enough awareness of its strengths and

weaknesses, and its competitive advantages

to manage emergency crises.

14 Recommendation

Through the achievement of the theoretical study, the

carrying out of appropriate statistical analyses, and

by the reaching of specific results, this study proved

that strict commitment to professional accounting

standards, and the faithful application of them, will

lead to the provision of capabilities to confront

emergency, sudden crises and pandemics. Therefore,

we recommend working towards adherence to the

standards issued by the competent authorities of the

profession.

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WSEAS TRANSACTIONS on BUSINESS and ECONOMICS

DOI: 10.37394/23207.2022.19.68

Victor Andrade Da Silveira,

Stella Regina Reis Da Costa, David Resende

E-ISSN: 2224-2899

788

Volume 19, 2022

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WSEAS TRANSACTIONS on BUSINESS and ECONOMICS

DOI: 10.37394/23207.2022.19.68

Victor Andrade Da Silveira,

Stella Regina Reis Da Costa, David Resende

E-ISSN: 2224-2899

789

Volume 19, 2022