IFRS and Accounting Quality: The Impact of Enforcement

47 Pages Posted: 30 Nov 2012

See all articles by Nelunika Samarasekera

Nelunika Samarasekera

Western Australia Department of Treasury

Millicent Chang

The University of Western Australia; University of Wollongong

Ann Tarca

University of Western Australia

Date Written: December 1, 2012

Abstract

The aim of this study is to investigate the impact of enforcement (greater monitoring of auditors and more regulatory scrutiny of financial reporting) on accounting quality under IFRS using measures of earnings smoothing, managing towards earnings targets, timely loss recognition and value relevance. Our sample consists of 495 UK listed firms in 2000-2009 under UK GAAP and IFRS (2,356 and 1,823 firm-years respectively), including 246 cross-listed firms (predominantly listed in Germany and the US). We find value relevance improves under IFRS for all firms and that firms are less likely to manage towards earnings targets. However measures based on earnings smoothing and timely loss recognition improve only for cross listed firms, pointing to a favourable impact of changes in the regulatory scrutiny of cross listed firms in the IFRS period.

Keywords: IFRS, accounting quality, public enforcement, auditor oversight, security market regulators

JEL Classification: M40, M41

Suggested Citation

Samarasekera, Nelunika and Chang, Millicent and Tarca, Ann, IFRS and Accounting Quality: The Impact of Enforcement (December 1, 2012). Available at SSRN: https://ssrn.com/abstract=2183061 or http://dx.doi.org/10.2139/ssrn.2183061

Nelunika Samarasekera

Western Australia Department of Treasury ( email )

1500 Pennsylvania Avenue, NW
Washington, DC 20220
United States

Millicent Chang

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Ann Tarca (Contact Author)

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
Australia
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

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