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The effect of audit quality and degree of international Financial Reporting Standards (IFRS) convergence on the accrual earnings management in ASEAN countries

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  • Zahratun Nadhir

    (University of Indonesia, Indonesia)

  • Ratna Wardhani

    (University of Indonesia, Indonesia)

Abstract

The purpose of this research is to analyze the effect of the degree of convergence of International Financial Reporting Standards (IFRS) and Audit Quality on company’s accrual earnings management. In addition, this research also aims to investigate the moderation role of the degree of convergence of IFRS on the relationship between audit quality and company’s accrual earnings management. This research covers several Association of Southeast Asian Nations (ASEAN) countries, consists of Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam. The methodology used in this research is the multiple regressions by using Least Square method. This study finds that the higher the degree of convergence of IFRS, the lower discretionary accruals, which means the higher quality of earnings. Meanwhile, the size and specialization of the auditor are not significantly effecting accrual earnings management which is described by the value of discretionary accruals. The results imply that being audited by Big-4 or specialized accounting firm, does not guarantee the lower discretionary accruals, which means do not guarantee that the accrual earnings management will be better. On the other hand, the degree of convergence of IFRS did not have a moderating role that influence the effect of audit quality on the accrual earnings management.

Suggested Citation

  • Zahratun Nadhir & Ratna Wardhani, 2019. "The effect of audit quality and degree of international Financial Reporting Standards (IFRS) convergence on the accrual earnings management in ASEAN countries," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(1), pages 105-120, September.
    • Handle: RePEc:ssi:jouesi:v:7:y:2019:i:1:p:105-120
    DOI: 10.9770/jesi.2019.7.1(9)
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    References listed on IDEAS

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    1. Dimitropoulos, Panagiotis E. & Asteriou, Dimitrios & Kousenidis, Dimitrios & Leventis, Stergios, 2013. "The impact of IFRS on accounting quality: Evidence from Greece," Advances in accounting, Elsevier, vol. 29(1), pages 108-123.
    2. Wan Adibah Wan Ismail & Khairul Anuar Kamarudin & Tony van Zijl & Keitha Dunstan, 2013. "Earnings quality and the adoption of IFRS‐based accounting standards," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 21(1), pages 53-73, May.
    3. Enomoto, Masahiro & Kimura, Fumihiko & Yamaguchi, Tomoyasu, 2015. "Accrual-based and real earnings management: An international comparison for investor protection," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(3), pages 183-198.
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    Cited by:

    1. Edmunds Čižo & Olga Lavrinenko & Svetlana Ignatjeva, 2020. "Determinants of financial development of the EU countries in the period 1995-2017," Post-Print hal-02919508, HAL.
    2. Edmunds Čižo & Olga Lavrinenko & Svetlana Ignatjeva, 2020. "Determinants of financial development of the EU countries in the period 1995-2017," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 2(2), pages 505-522, June.

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    More about this item

    Keywords

    accrual earnings management; audit quality; ASEAN; convergence; International Financial Reporting Standards (IFRS);
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Z23 - Other Special Topics - - Sports Economics - - - Finance

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