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Research Note. Compliance with group accounting standards – the vertical adjustment issues: field studies of multi-nationals


  • Arne Fagerstrom
  • Lars G. Hassel
  • Gary M. Cunningham


Compliance with accounting standards is a major issue in Europe and elsewhere. Research on the horizontal dimension shows non-compliance even though financial reports state compliance and auditors concur. The vertical dimension is more relevant to discover the extent and reasons for non-compliance. Previous research shows that financial executives of multi-nationals indicated non-compliance when asked directly, even though financial reports and auditors state compliance. This follow-on study uses field-studies of subsidiaries of multi-nationals in three countries to explore the extent and reasons for non-compliance for vertical adjustments when consolidating. The method of agreement and method of differences were used to analyse data. Results show substantial non-compliance and some reasons for non-compliance, notably income smoothing. The vertical dimension is appropriate for continued research and this study provides a model for similar research.

Suggested Citation

  • Arne Fagerstrom & Lars G. Hassel & Gary M. Cunningham, 2007. "Research Note. Compliance with group accounting standards – the vertical adjustment issues: field studies of multi-nationals," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 4(6), pages 650-665.
  • Handle: RePEc:ids:ijaape:v:4:y:2007:i:6:p:650-665

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