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Dual/joint auditors and the level of compliance with international financial reporting standards (IFRS-required disclosure): The case of financial institutions in Kuwait

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  • Faisal S. Alanezi
  • Mishari M. Alfaraih
  • Eyad A. Alrashaid
  • Saad S. Albolushi
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    Abstract

    Purpose – The purpose of this paper is to examine the use of a dual-audit/joint-audit process and the level of compliance with IFRS in listed Kuwaiti financial institutions. Design/methodology/approach – An OLS-regression model was used to test the relationship among dual-audit/joint-audit process and the level of compliance with IFRS-disclosure. The sample was based on 33 firm observations in 2006. Findings – The main results reveal that financial institutions audited by dual-auditors were more compliant with IFRS-required disclosure than financial institutions audited by joint-auditors. Research limitations/implications – The authors have assumed that the work done by both auditors is as per the Central Bank of Kuwait (CBK) circular which obligates both auditors to do their fieldwork independently and then consolidate their work before issuing the final audit report. In the authors’ opinion, it is less likely that both auditors will not comply with CBK regulation, especially because CBK has the right to ban a non-compliant audit firm from auditing banks. The authors did not ask audit firms whether they are complying with this circular because it was believed that audit firms would not disclose a non-compliance issue with regulators to outsiders. Practical implications – This paper provides empirical evidence about the effectiveness of using dual-auditors in promoting compliance with IFRS-disclosure. Originality/value – To the authors’ knowledge, this is the first study to explore the association between the levels of compliance with IFRS-disclosure and the dual/joint audit process in the financial institutions listed on the Kuwait Stock Exchange.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Journal of Economic and Administrative Sciences.

    Volume (Year): 28 (2012)
    Issue (Month): 2 (August)
    Pages: 109-129

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    Handle: RePEc:eme:jeaspp:v:28:y:2012:i:2:p:109-129

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    Related research

    Keywords: Disclosure; Dual audit; Financial reporting; International standards; Joint audit; Kuwait;

    References

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    1. Street, Donna L. & Gray, Sidney J. & Bryant, Stephanie M., 1999. "Acceptance and Observance of International Accounting Standards: An Empirical Study of Companies Claiming to Comply with IASs," The International Journal of Accounting, Elsevier, vol. 34(1), pages 11-48.
    2. Wallace, R. S. Olusegun & Naser, Kamal, 1995. "Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong," Journal of Accounting and Public Policy, Elsevier, vol. 14(4), pages 311-368.
    3. Begoña Giner Inchausti, 1997. "The influence of company characteristics and accounting regulation on information disclosed by Spanish firms," European Accounting Review, Taylor & Francis Journals, vol. 6(1), pages 45-68, May.
    4. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
    5. Al-Shammari, Bader & Brown, Philip & Tarca, Ann, 2008. "An investigation of compliance with international accounting standards by listed companies in the Gulf Co-Operation Council member states," The International Journal of Accounting, Elsevier, vol. 43(4), pages 425-447, December.
    6. R.M. Haniffa & T. E. Cooke, 2002. "Culture, Corporate Governance and Disclosure in Malaysian Corporations," Abacus, Accounting Foundation, University of Sydney, vol. 38(3), pages 317-349.
    7. Stephen Owusu-Ansah & Joanna Yeoh, 2005. "The effect of legislation on corporate disclosure practices," Abacus, Accounting Foundation, University of Sydney, vol. 41(1), pages 92-109.
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