The “Big” Consequences of IFRS: How and When Does the Adoption of IFRS Benefit Global Accounting Firms?

2015 ◽  
Vol 91 (4) ◽  
pp. 1257-1283 ◽  
Author(s):  
Maria Wieczynska
Keyword(s):  
Financial Reporting ◽  
Regulatory Regime ◽  
Reporting Standards ◽  
Accounting Firms ◽  
Financial Reporting Standards ◽  
Auditor Switching ◽  
Ifrs Adoption ◽  
The United Kingdom ◽  
Big 4 ◽  
Audit Firms

ABSTRACT I investigate how the adoption of International Financial Reporting Standards (IFRS) affects audit markets. Specifically, I examine the effect of IFRS adoption on the likelihood and direction of auditor switching in a sample of firms from five European Union countries: the United Kingdom, Germany, Spain, Italy, and Poland during the period from 1998 through 2010. I hypothesize that IFRS adoption creates an expert advantage for global audit firms (i.e., Big 4 audit firms, Grant Thornton, and BDO) during a regime shift in reporting standards. I find that clients are more likely to switch from small to global audit firms in the year of IFRS adoption. I also hypothesize that the strength of a country's regulatory regime affects the likelihood of auditor replacement around IFRS adoption. I find that firms listed in countries with high-quality regulation and enforcement are significantly more likely to switch from small to global audit firms in the year of IFRS adoption (with the odds of the switch almost doubled when compared to non-adoption years). In weaker regulatory regimes, IFRS adoption is not associated with an increase in auditor switching. Additional tests provide evidence that global audit firms' advantage stems from their perceived IFRS expertise. Finally, the results confirm that not only Big 4, but also Grant Thornton and BDO, benefit from IFRS adoption.

scholarly journals International Financial Reporting Standards (IFRS) and Reporting Quality in Nigeria: An Assessment of Selected Quoted Firms

2020 ◽  
Vol 4 (1) ◽  
pp. 11
Author(s):  
Aminu Abdullahi ◽  
Musa Yelwa Abubakar
Keyword(s):  
Financial Reporting ◽  
Descriptive Analysis ◽  
Secondary Data ◽  
Reporting Quality ◽  
Reporting Standards ◽  
Financial Reports ◽  
Information Reduction ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Audit Firms

This study investigates the effect of IFRS adoption on reporting quality in Nigeria. Secondary data were sourced from financial reports of a sample of 79 quoted Nigerian firms, with the help of Nimegen Centre for Economics (NiCE) qualitative reporting index for reporting quality. The study covered a period of 10 years, i.e. 2007 to 2011 as SAS regime and 2012 to 2016 IFRS regime. ANOVA test and descriptive analysis, were utilised for the analysis. The study concludes that, IFRS adoption has made significant positive difference in the extent of reporting quality. It is recommended that Nigerian firms should adopt appropriate measures to improve the level of relevance, comparability and verifiability of their financial reports through provision of more forward looking information, reduction in the use of technical jargons and appointment of more reputable audit firms.

Neither takers nor makers: The Big-4 auditing firms as regulatory intermediaries

2019 ◽  
Vol 25 (3) ◽  
pp. 349-374 ◽  
Author(s):  
Lior Herman
Keyword(s):  
Financial Reporting ◽  
Market Failure ◽  
Balance Of Power ◽  
Reporting Standards ◽  
Global Networks ◽  
Financial Reporting Standards ◽  
Big 4 ◽  
Audit Firms ◽  
Regulatory Capacity ◽  
International Audit

What are regulatory intermediaries? What roles do regulatory intermediaries play? What is the basis of their regulatory capacity and authority? This article examines these questions by focusing on the Big-4 international audit firms in the context of harmonizing international financial reporting standards. I argue that regulatory intermediaries perform a variety of regulatory market failure correcting functions for both regulatory makers and takers. Intermediation is far from being secondary to the regulatory process, and intermediaries, particularly those of transnational nature, have a pivotal role. Furthermore, regulatory intermediaries, as exemplified in the case of the Big-4, continuously challenge the primacy of the state, and the division of labor and balance of power between regulatory actors. Regulatory entrepreneurship and activism, coupled with unique organizational model based on global networks of partnerships, have led to the ascension of the Big-4 to unprecedented regulatory and market powers.

scholarly journals Earnings management to avoid earnings decreases and losses

2021 ◽  
Vol 20 ◽  
pp. e3153
Author(s):  
Verônica de Fátima Santana ◽  
Raquel Wille Sarquis
Keyword(s):  
United States ◽  
Earnings Management ◽  
Financial Reporting ◽  
Reporting Standards ◽  
Working Capital ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Geographical Regions ◽  
The World ◽  
Before And After

This study evaluates the prevalence of earnings management to avoid losses and earnings decreases across the World. This practice was first documented by Burgstahler and Dichev (1997) for United States firms from 1976 to 1987. We replicate their study for a more recent and global sample. Firms that do not seem to manage earnings do avoid reporting earnings decreases, but we found persistent evidence of earnings management to avoid reporting losses. The results are consistent across different geographical regions, countries, and before and after International Financial Reporting Standards (IFRS) adoption. Unlike Burgstahler and Dichev (1997), however, we were not able to find evidence on which components of earnings (cash flow from operations, changes in working capital, or other accruals) firms mainly manage to increase earnings, concluding they likely use a bundle of all these components. Our results are important mainly to financial analysts and general investors, who should be careful in giving good prospects to firms who presented small profits since they are likely small losses artificially managed to look better, a practice widely spread across time and geographical regions among IFRS adopters and non-adopters.

The readability impact of international financial reporting standards

2015 ◽  
Vol 27 (3) ◽  
pp. 282-303 ◽  
Author(s):  
Glenn Richards ◽  
Chris van Staden
Keyword(s):  
Computational Linguistics ◽  
Financial Reporting ◽  
Annual Report ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Financial Disclosures ◽  
Negative Impacts

Purpose – This paper aims to compare the readability of narrative annual report disclosure pre- and post-International Financial Reporting Standards (IFRS) adoption using a computational linguistics programme to determine if annual report disclosures have become more difficult or easier to read following the adoption of IFRS. Design/methodology/approach – This paper empirically measures narrative annual report disclosure readability pre- and post-IFRS adoption using a computational linguistics programme. In this analysis, the authors control for variables that have been identified as relevant to the understanding of financial disclosures, such as size, business volatility, financial leverage and industry. Findings – Significant relationships have been identified between IFRS adoption and reduced readability indicators using readability formulas, and also using other factors such as increased length of annual report disclosures and increased use of tables. Findings suggest that the adoption of IFRS has added complexity and resulted in reduced readability of annual report disclosures. Practical implications – Academic backing to claims of IFRS’s negative implications for financial statements and their ultimate users should encourage action on the part of standard setters and report preparers to address the negative impacts of IFRS adoption. Originality/value – This paper is the first to provide evidence that New Zealand equivalents to IFRS adoption have resulted in not only longer disclosures but also more complicated disclosures.

scholarly journals PERFORMANCE APPRAISAL AS A PREDICTOR OF EARNINGS MANAGEMENT IN A CONSUMER GOODS COMPANY: EVIDENCE FROM A COMPARATIVE ASSESSMENT OF PRE-AND POST INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) ADOPTION IN NIGERIA

2020 ◽  
pp. 28-33
Author(s):  
Paul Femi Fashagba ◽  
Abiola Abosede Solanke
Keyword(s):  
Earnings Management ◽  
Performance Appraisal ◽  
Financial Reporting ◽  
Consumer Good ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Ratio Data ◽  
Negative Effect

Previous studies have examined the effects of International Financial Reporting Standards (IFRS) adoption on earnings management. However, these studies focused attention on the general implications of IFRS adoption on earnings management with no specific focus on the links between performance appraisal and earnings management in the pre and post IFRS era. The objective of the study is to examine the relationship between performance appraisal and earnings management in Pre and Post IFRS period. The dependent variable in the study is earnings management proxy by earnings per share. The independent variable is performance appraisal measured by profitability ratio, liquidity ratio, and debt ratio. Data were extracted from the records of a consumer good company in Nigeria. The multiple regression analysis was applied. Results revealed that in the pre IFRS period in Nigeria, performance appraisal had significant positive effect on earnings management, while it had significant negative effect in the post IFRS period. It is important that company’s management adhere strictly to the provisions of the IFRS guidelines. KEYWORDS: IFRS, earnings management, profitability, liquidity, debt

scholarly journals The role of Politics and Economics in the International Financial Reporting Standards (IFRS) Adoption

2019 ◽  
Vol 36 (2) ◽  
pp. 407
Author(s):  
Araceli Mora
Keyword(s):  
Financial Reporting ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Los Grupos

La adopción de las NIIF desde 2005 ha conllevado beneficios, pero la investigación también ha demostrado que su efecto no ha sido uniforme en los distintos países debido a las diferencias institucionales y en los incentivos. La teoría contractual ofrece un marco teórico para la investigación de las consecuencias económicas y de los incentivos de los grupos de interés para ejercer presión, pero la investigación sobre la actividad de los políticos para interferir en la contabilidad es escasa. El objetivo de este estudio es mostrar el papel de los gobiernos en la contabilidad. Para ello se muestran los cambios acontecidos en el proceso de adopción de las NIIF en la UE para incrementar la interferencia política en nombre del “interés público”, destacando el caso del sector financiero. Se concluye que todas las partes involucradas deberían comprometerse a buscar el equilibrio entre normas basadas en principios y mecanismos de control para mejorar el proceso de comparabilidad con las NIIF.

scholarly journals Earnings management to avoid earnings decreases and losses

2021 ◽  
Vol 20 ◽  
pp. e3153
Author(s):  
Verônica de Fátima Santana ◽  
Raquel Wille Sarquis
Keyword(s):  
United States ◽  
Earnings Management ◽  
Financial Reporting ◽  
Reporting Standards ◽  
Working Capital ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Geographical Regions ◽  
The World ◽  
Before And After

This study evaluates the prevalence of earnings management to avoid losses and earnings decreases across the World. This practice was first documented by Burgstahler and Dichev (1997) for United States firms from 1976 to 1987. We replicate their study for a more recent and global sample. Firms that do not seem to manage earnings do avoid reporting earnings decreases, but we found persistent evidence of earnings management to avoid reporting losses. The results are consistent across different geographical regions, countries, and before and after International Financial Reporting Standards (IFRS) adoption. Unlike Burgstahler and Dichev (1997), however, we were not able to find evidence on which components of earnings (cash flow from operations, changes in working capital, or other accruals) firms mainly manage to increase earnings, concluding they likely use a bundle of all these components. Our results are important mainly to financial analysts and general investors, who should be careful in giving good prospects to firms who presented small profits since they are likely small losses artificially managed to look better, a practice widely spread across time and geographical regions among IFRS adopters and non-adopters.

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