The Impact of International Financial Reporting Standards (IFRS) on Audit Quality Measurement: The Case of Selected Commercial Banks of Ethiopia (original) (raw)
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IFRS AND AUDIT QUALITY: A DISCRETIONARY MODEL APPROACH
MALETE JOURNAL OF ACCOUNTING AND FINANCE, 2023
This study examined the relationship between International Financial Reporting Standards (IFRS) and audit quality in Nigeria. With the growing adoption of IFRS, interest has risen about the efficiency of audits regarding accurate financial reporting. To actualize this, we investigated the impact of IFRS adoption on audit quality and identified challenges and opportunities for improvement. This study focused on companies quoted in the financial services sector of the Nigerian Exchange Group market between 2006 and 2022. A sample of twenty (20) financial institutions comprising of ten (10) banks and ten (10) insurance companies were selected, and data from audited annual reports was subjected to a static panel regression technique. Findings from the estimated regression revealed the existence of a positive connection between IFRS adoption and discretionary accruals based on the Modified Jones Model. Conversely, the regression coefficient revealed a significant negative relationship between the variables of this study when the discretionary expenses were considered. Based on the findings, audit quality has not improved after the adoption of IFRS. Equally, the adoption of IFRS has reduced discretionary expenses significantly. This study recommended among others that regulatory authorities should enforce appropriate application of accounting standard in order to reduce discretionary accruals and avoid manipulation of discretionary expense.
The comparative analysis of discretionary accruals viewed from the styles of audit and IFRS adoption
Journal of Economics, Business and Accountancy Ventura, 2016
Discretionary accruals in auditing have been the essential factor. Therefore, an analysis of this factor viewed from different styles of audit and IFRS adoption can be more interesting to study. This study discusses financial statement comparabil-ity in terms of audit style and IFRS adoption. It took the sample consisting of 43 manufacturing companies listed in Indonesia Stock Exchange; all have published their financial statements for the period of 2010-2013. The data were analyzed by using Kruskal-Wallis test and Wilcoxon test. The results showed that financial statement with the same accounting standards and audited by the same big 4 auditors, subject to the same audit style, are more likely to have comparable dis-cretionary accruals than financial statement audited by different Big 4 firms with different styles. By comparable, it means that different financial statements in the same industry and the same accounting standard will have more similar discre-tionary accruals.
International Business and Accounting Research Journal, 2019
This study propose to explore the moderating role of audit quality on the relationship between IFRS adoption and earnings management as well as the effect of IFRS adoption on earnings management in the context of Bangladesh, as developing economy. Earlier literature document that the relationship among IFRS adoption, audit quality and earnings management are not conclusive. In case of IFRS adoption, it is incoherent which may be the result of difference in culture, practices and legal strength of the country. This study considers discretionary accruals as proxy of earnings management which is measured by the extended modified Jones model. Moreover, the influence of audit quality on the association between IFRS adoption and earnings management is also proposed to investigate. This study expects to explore the effect of IFRS adoption on earnings management in the context of developing country, like Bangladesh. It may be informative for the reader to understand the outcome of IFRS adoption, audit quality on earnings management in developing economy.
2020
This study examined the effect of IFRS adoption on the quality of financial statements of selected firms on the Ghana Stock Exchange. The study used the extent of management practices as a metric for financial statement quality. The audited annual reports of the selected firms from the GSE were analyzed using a panel regression model over the period 2001-2006 and 20072014. The study finds the adoption of IFRS to be significantly and negatively affect earnings management practices and, thus, improves financial statement quality. On the extent of earnings management practices, the study finds a decrease in the postadoption era as opposed to the pre-adoption era, signifying an improvement in accounting quality. The panel regression results show that adopting IFRS significantly decreases the extent of earnings management.
The Influence of Improvements in Accounting Standards on Earnings Management: The Case of IFRS
Australian Accounting Review, 2014
This article examines the effect of improvements in the quality of International Financial Reporting Standards (IFRS) on the level of earnings management. In order to achieve this aim, we study the accounting quality of German listed companies through discretionary accruals yielded from 1998 to 2006. We assess the effectiveness of efforts by the International Accounting Standards Board to improve IFRS by using two indices that consider the revision process of the standards, and their mandatory application. Our results indicate that the improvement of accounting standards quality significantly reduces the level of reported negative discretionary accruals of the German listed firms during the period of analysis, once incentive variables are controlled. Further, companies gradually assume the quality of the new standards from the moment they can be voluntarily applied.
IFRS adoption and accounting quality: Evidence from the Nigerian banking sector
Corporate Ownership and Control, 2016
This paper examined whether mandatory adoption of IFRS is associated with improvement in accounting quality of banks listed on the Nigerian Stock Exchange (NSE). The study made use of secondary data; data were extracted from financial statements from 2010 – 2013. The data were analyzed using Ordinary Least Square (OLS) from SPSS. The findings of the study revealed that after the adoption of IFRS, the rate at which Nigerian banks engage in income smoothing increased, while earnings management towards small positive earnings reduced, thus reducing the quality of accounting amount disclosed in the financial statements. The findings of this study have effect on the efficiency of the stock market. Therefore, other bodies, such as SEC, BOFIA, among others should put in place measures that will limit the extent to which bank managers uses their discretion and alternatives in accounting standards to manage earnings.
IFRS Adoption and Accounting Quality: A Review
Literature on IFRS adoption by countries concerning high quality, understandable and applicable IFRS in order to be worldwide accepted has generated a pertinent discussion, since the results presented in the literature are not unanimous on the adoption of IFRS and accounting quality. Soderstrom and Sun (2007) analyzed a research published in leading accounting journals selected from 1990's on the consequences of IFRS adoption and found that the determinants of accounting quality after the adoption of these standards are articulated in: quality of the standards; political and judicial system in the country; financial reporting incentives. Based on Soderstrom and Sun (2007) study, this work aims to analyze literature on IFRS adoption and the accounting quality from 2006. In order to achieve this goal, a systematic search of the literature focused on a "Web of Science" database associated with a bibliometric analysis was done, aiming to understand the discussion on IFRS adoption and accounting quality in literature. As a result, it was found that the adoption of IFRS related to the accounting standard factors, political and judicial systems of the countries and the financial reporting incentives discussed by Soderstrom and Sun (2007) to determine the quality of accounting remains persistent. Overall, this analysis concludes that the quality of accounting cannot be evaluated only in terms of IFRS adoption, either on a voluntary or mandatory basis. The results of this study present at least two limitations: The studies on IFRS adoption researched, despite tackling institutional issues, do not show the real complexity of the reality, due to reduce the quality of the social context to the quality of economic rationality; and the alleged quality of standards based on principles is not enough to determine the quality of accounting.
Economic Research - Ekonomska Istrazivanja, 2020
This paper sought to examine the pre-and post-IFRS adoption effects on the financial reporting quality (FRQ) of manufacturing firms listed on the Ghana Stock Exchange (GSE) via means of correlation analysis, as well as regression analysis using a standard Fixed Effect (FE) model and the Ordinary Least Squares (OLS) technique. Data was sourced from the audited annual reports of eleven manufacturing firms observed over the period 2001 to 2006 for the pre-adoption era, and 2007 to 2014 for the post adoption era, making 148 firm-year observations. Using earnings management, measured by modified Jones' discretionary accruals, as a proxy for FRQ, the regression results showed a significant negative effect of IFRS adoption on earnings management, thus indicating an improvement in the FRQ. On the extent of earnings management practices both pre-and post-IFRS adoption, the study finds a decrease in the post-adoption era as against the pre-adoption era, also signifying an improvement in a...
Quality of Accounting Reporting After the IFRS Adoption in Nigeria
International Journal of Business, Economics and Management, 2016
This study determined the effect of IFRS on the quality of financial reporting among Nigerian financial firms. The study adopted stock price (Ohlson, 1995) and return (Easton and Harris, 1991) models, that have been commonly used in accounting research. Data were collected from Thompson Reuters (stock price) and Bank Scope Data Streams (net income and total expenses) to determine the relationships. The study found that there is a greater relationship between net income and total expenses with the stock price and return. Furthermore, the relationships have been statistically significant using Cramer Zstatistic for both stock price and return model. The overal result have shown value relevance of net income, operating expenses, and change in net income and operating expenses has improved as a result of IFRS adoption among Nigerian listed financial institutions. The study implication for the policy makers, standard setters and investors are to give more emphasis on the use of IFRS for all firms even if they are not listed in the stock market as IFRS adoption provided a better quality accounting information than domestic reporting. Besides the relevance of these study findings to security market, the literature has provided greater contributions to fewer market research in African capital market particularly, Nigeria after the IFRS adoption being the first study to carry such study in Nigeria.