Association between feedforward control and accounting misreporting: the moderating role of relational capital

Purpose This study aims to discover that feedforward control as a mediating variable may underestimate the direct influence of environment volatility on a manager’s inclination to make false accounting reports. Design/methodology/approach This research used a survey questionnaire to collect data from 361 respondents in Vietnam’s medium and large enterprises. The structural modelling results revealed the role of feedforward control in controlling accounting information quality under the pressure of an uncertain business environment. Findings Empirical evidence showed the effect of feedforward control practice on accounting misreporting as the indicator of the productivity dimension, which is applied to evaluate financial information quality. This study also discovered the direct and moderating impact of relational capital on restricting the fraud or errors in preparing financial information as a contribution to the theory of earnings management behaviour. Research limitations/implications This study did not exploit and investigate the impact of each intellectual capital component on feedforward control or accounting misreporting. The analysis focuses on a limited sample of Vietnamese firms. Practical implications Managers may use relational capital to administrate the relationship between the management control system in general or the feedforward control in more detail and the inaccuracy in accounting reporting. Originality/value Although greater feedforward control can aid in attaining projections since internal forecasting, the existing studies focused on feedback control activities and neglected this research arena.