scholarly journals Auditor-Provided Tax Services and Accounting for Tax Uncertainty

2019 ◽  
Vol 54 (03) ◽  
pp. 1950011
Author(s):  
Christoph Watrin ◽  
Stephan Burggraef ◽  
Falko Weiss
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Quality ◽  
Tax Avoidance ◽  
Accounting Standards ◽  
Tax Planning ◽  
Conservative Approach ◽  
Positive Relation ◽  
Fin 48 ◽  
Financial Reporting Standards

This paper investigates the associations of auditor-provided tax services (APTS) with tax planning and audit quality using a German sample. Our findings differ from those of previous U.S. studies, which we attribute to the fact that prior to 2015, the International Financial Reporting Standards (IFRS) did not contain a clear regulation similar to FIN 48, which requires firms to reserve for tax uncertainties. We find for our IFRS sample a negative association between APTS and tax avoidance, which suggests that auditors are aware that firms might not reserve for tax uncertainties and may advise more conservative tax strategies. Additionally, we find a positive relation between the level of APTS and the sustainability of tax strategies in client firms, consistent with this conservative approach. Furthermore, our results show that APTS are positively related to audit quality for our sample. This finding suggests that auditors, being aware of remaining tax uncertainties that are not reserved for, are more reluctant to accept earnings management, which would further increase the risk of restatement. Taken together, the results of our study suggest the importance of accounting standards regarding tax uncertainties for the implications of APTS.

scholarly journals The impact of IFRS-based accounting standards on earnings management: evidence from Malaysia

2016 ◽  
Vol 5 (1) ◽  
pp. 1
Author(s):  
Yosra Makni Fourati ◽  
Rania Chakroun Ghorbel
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Emerging Market ◽  
Accounting Standards ◽  
Absolute Value ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Earning Quality ◽  
The Impact ◽  
Different Levels

This study aims to examine the consequences of International Financial Reporting Standards (IFRS) convergence in an emerging market. More specifically, we investigate whether the adoption of the new set of accounting standards in Malaysia is associated with lower earnings management. Using a sample of 3,340 firm-year observations across three reporting periods with different levels of IFRS adoption, we provide evidence that IFRS convergence improves earning quality. In particular, we find a significant decrease in the absolute value of discretionary acccruals in the partial IFRS-convergence period (2007-2011), whereas this effect is restrictive after the complete IFRS- implementation.

scholarly journals Impact of Changes in Accounting Standards on Earnings Management

2020 ◽  
Vol 2 (2) ◽  
pp. 166-175
Author(s):  
Kawa W. Muhamad ◽  
Subhi M. Saleh ◽  
Kees van Paridon
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Quality Standards ◽  
Financial Reporting Quality ◽  
High Quality ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Accounting Principles

This study considers the question whether the changes in Accounting Standards has led to companies making less use of earnings management. The paper is an attempt to investigate whether the application of high quality standards like International Financial Reporting Standards (IFRS) is related to high financial reporting quality. This study addresses this issue empirically. Furthermore, this research examines whether German companies that have applied IFRS have less earnings management compared to German companies that report according to the German Generally Accepted Accounting Principles (GGAAP). The sample, consisting of two equally large listed companies in Germany (Südzucker Group and Henkel Group) from 2003-2014. The study suggests that IFRS-adopters show different earnings management performance compared to companies reporting under German GAAP. This finding contributes to the discussion on whether high quality standards are appropriate and operational in countries with weak investor protection rights. The result shows that adopters of IFRS in Germany can be related with less use of earnings management as a result of changes in accounting standards. This result is contradictory with previous research that was done by Van Tendeloo and Vanstraelen, (2005), and consistent with the previous research conducted by Ball et al. (2003).

scholarly journals The Impact of Financial Statement Comparability on Earnings Management: Evidence from Frontier Markets

2020 ◽  
Vol 8 (4) ◽  
pp. 73
Author(s):  
Wil Martens ◽  
Prem W. S. Yapa ◽  
Maryam Safari
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Common Law ◽  
Accounting Standards ◽  
Real Earnings Management ◽  
Financial Statement ◽  
Financial Reporting Standards ◽  
Developed Markets ◽  
Accounting Comparability ◽  
The Impact

This paper examined whether financial statement comparability constrains opportunistic earnings management in frontier market countries. Using a large sample of 19 frontier market countries, and an accounting comparability method that maps comparability across several accounting standards, the results show that enhanced financial comparability constrains accruals earnings management (AEM). Contrary to developed markets and novel to this study, a significant relationship between financial comparability and real earnings management (REM) was not found. For greater robustness, AEM and REM were also tested on both International Financial Reporting Standards (IFRS) adopting and non-adopting countries. The results suggest IFRS adoption constrains AEM, yet exhibited no impact on constraining REM. Additionally, the use of BigN auditors failed to conclusively show an ability to moderate EM. When combined, the results suggest that frontier markets engage in less REM than expected. It is also noted that the legal roots (civil vs. common law) play a significant role in constraining earnings management. Common law countries exhibited lower AEM when comparability increased; this significance was not found in countries that were rooted in civil law. Contributions from this study show that findings from developed markets cannot be generalised to frontier markets.

The Effect of Audit Duality on Audit Quality

2020 ◽  
Vol 19 (2) ◽  
pp. 65-89
Author(s):  
Lawrence Chui ◽  
Oksana Kim ◽  
Byron J. Pike
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Accounting Standards ◽  
Financial Statement ◽  
Regulatory Environment ◽  
Public Companies ◽  
Potential Reduction ◽  
Audit Firm ◽  
Financial Reporting Standards ◽  
Jel Classifications

ABSTRACT The Russian regulatory environment offers a unique audit duality situation in which public companies receive two separate financial statement audits by the same audit firm: one based on Russian Accounting Standards (RAS) and the other on International Financial Reporting Standards (IFRS). We assess whether audit duality influences audit quality, measured by modifications to the standard audit report. Using a sample of public Russian companies from 2004 to 2016, we find that audit duality significantly reduces auditors' propensity to modify the audit opinions for both the RAS and IFRS audits as compared to companies that engage a different firm for each audit. This potential reduction in audit quality is mitigated when the company is in a loss position. The presence of Big N dual auditors does not diminish the observed findings and, in fact, appears to translate into lower-quality RAS-based audits of financially distressed companies. JEL Classifications: M42; M48.

The Impact of IFRS adoption and AQ upon Earnings Management in Saudi Stock Exchange (Tadawul): تأثير تطبيق المعايير الدولية لإعداد التقارير المالية وجودة المراجعة على إدارة الأرباح للشركات المدرجة في السوق المالية السعودية (تداول)

2020 ◽  
Vol 4 (15) ◽  
Author(s):  
Maha Nasser Allehaidan
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Quality ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Listed Firms ◽  
Discretionary Accrual ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
The Impact

The main purpose of this paper is to examine the impact of International Financial Reporting Standards (IFRS) adoption and Audit Quality (AQ) on Earnings Management (EM) practices in Saudi Arabia listed firms. EM is measured by the discretionary accrual using Healy (1985) and Kothari, Leone, and Wasley (2005) models. The research sample contains 16 Saudi listed firms during the period from 2014 to 2019. Statistical analysis including t-test and linear regression were used to test the research hypotheses. The investigation indicates that there is a negative relationship between IFRS adoption and EM practices, especially if it is combined with AQ, while it found a positive relationship between firms’ size and accrual EM, and no significant impact of AQ on firms’ debt ratio and EM practices. The importance of these results lies in providing clear evidence that the adoption of IFRS in developing countries has helped reduce earnings manipulation practices, which contributes to gaining confidence in Saudi firms and thus attracting many foreign investments.

Transparency of Fair Value Accounting and Tax

2014 ◽  
pp. 476-494
Author(s):  
Eva Eberhartinger ◽  
Soojin Lee
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
Reporting Standards ◽  
Fair Value Accounting ◽  
Financial Reporting Standards ◽  
Comprehensive Income ◽  
Accounting Measurement ◽  
Other Comprehensive Income

This chapter examines transparency in fair value accounting (measurement, presentation, additional disclosure), with special emphasis on tax disclosure and on the presentation of fair values in the statement of other comprehensive income. After considering the international relevance of the International Financial Reporting Standards, the chapter discusses fair value accounting in the context of accounting standards. It then reviews prior research to determine whether fair value accounting adds to accounting transparency. It also looks at the measurement and presentation of the transparency of fair value accounting based on relevance and reliability, along with issues of earnings management and procyclical effects.

scholarly journals KONVERGENSI INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) DAN MANAJEMEN LABA DI INDONESIA

2013 ◽  
Vol 2 (2) ◽  
Author(s):  
Yona Octiani Lestari
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Financial Statements ◽  
Fair Value ◽  
Financial Reporting Quality ◽  
New Paradigm ◽  
Financial Reporting Standards

<p><em>The existence of</em><em> convergence of accounting standards to IFRS create a new paradigm in the accounting world. This requires the convergence of IFRS accounting standards that have been used to adopt new accounting standards with IFRS</em><em>. The convergency accounting standards to IFRS increase a variety of influences, in accordance with IFRS characteristics such as : principle based, the use of fair value and more disclosure. Principle Based Standards require more judgment in its application, while the used of fair value items make the financial statements are presented with the actual values, more disclosure would reduce the level of information asymmetry. Convergence of IFRS is expected increasing financial reporting quality, such as, increased camparability and transparency of financial statements. Thus, with the convergence to IFRS expected reduce earnings management opportunities.</em></p>

scholarly journals IMPLIKASI MANAJEMEN LABA TERHADAP KONVERGENSI IFRS (INTERNATIONAL FINANCIAL REPORTING STANDARDS) DI INDONESIA

AKUNTABILITAS ◽  
2019 ◽  
Vol 11 (2) ◽  
pp. 87-98
Author(s):  
Media Kusumawardani
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Financial Reporting ◽  
Audit Quality ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Manufacturing Companies ◽  
Control Variables ◽  
Financial Reporting Standards ◽  
Operating Cash Flow

This paper addresses the question whether International Financial Reporting Standards (IFRS) is associated with lower earnings management.  The objective of this study is to examine the effect of IFRS convergence on the earnings management of Indonesian  firms by using audit quality as moderating variable. The research also includes several control variables (size, leverage, operating cash flow). The research objects were the manufacturing companies listed in Indonesia Stock Exchange from 2010-2013. The method of data collection is random sampling method and resulted 312 firms observation. Type of data are secondary data in the form of financial statement as the media manufacturing companies. The data were analyzed by using multiple regression analysis with Eviews8. In this research, the IFRS convergence is found not to have significant effect on earnings management and  the IFRS convergence with audit quality as moderating variable is found not to have significant effect on earnings management. The other result indicates that among the three control variables, size leverage and operating cash flow indicate the negative effect on earnings management. This research indicate that mandatory adopters of IFRS in Indonesia cannot be associated with lower earnings management.

scholarly journals Constructing a Financial Reporting Disclosure Quality Model of Listed Firms in Malaysia

2021 ◽  
Vol 22 (2) ◽  
pp. 1034-1046
Author(s):  
Daw Tin Hla ◽  
Sharon Cheuk ◽  
Abu Hassan Md Isa ◽  
Shaharudin Jakpar
Keyword(s):  
Financial Reporting ◽  
Service Sector ◽  
Audit Quality ◽  
Essential Feature ◽  
Accounting Standards ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Disclosure Quality ◽  
Listed Firms ◽  
Financial Reporting Standards

The national accounting standards set by the Malaysian Accounting Standards Board (MASB) is largely converged with the International Financial Reporting Standards (IFRS). The benefit arising from this is to enable foreign investors to analyse their investments via a standardised financial reporting system in Malaysia. Financial reporting disclosure quality by the listed firms in the consumer product and service sector on Bursa Malaysia is an essential feature in the firms’ financial reporting to the public. This research evaluates the development of financial reporting disclosure quality assurance by firms listed on Bursa Malaysia, by examining financial reporting disclosure quality and subsequent compliance with the International Financial Reporting Standards. This study uses a content analysis approach to identify a financial reporting standard compliance disclosure index, based the financial statements issued by firms listed on Bursa Malaysia from 2008 – 2016. A panel regression model is utilised to construct a model of financial reporting disclosure quality of the firm, based the extent of compliance with IFRS disclosure requirements from the following perspectives: corporate governance practice, audit quality and corporate social responsibility. The sustainability of financial reporting disclosure quality by the listed firms and subsequently the Malaysian capital markets will enable the same to attain a competitive edge in the international markets. In addition, this study will discuss financial reporting disclosure quality implications relevant to the policy makers in Bursa Malaysia, and it is envisaged that such model can be utilised in the improvement of future financial reporting policies.

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