The International Journal of Accounting最新文献

On May 27, 2014, Regulation (EU) No 537/2014 was published in the Official Journal of the European Union. Aiming to enhance audit quality, the new regulation establishes important limitations to the selling of non-audit services by the audit firm to audit clients and a maximum tenure of ten years with the audit firm. However, it should be noted that the extant research has not consistently supported that non-audit services or long tenures impair the quality of audits. This research studies whether these provisions have been empirically associated with reduced audit quality for Spain. Because of its low litigation risk, the potentially negative impact of both non-audit services and tenure on audit quality should be clearly observed in the Spanish audit market. Nevertheless, we do not find significantly lower levels of audit quality associated with either non-audit services or long audit tenures. However, these results are conditional on the validity of using abnormal accruals to measure audit quality.

This study examines whether the strength of legal enforcement at the country level plays a role in the value-relevance of accounting quality for loan pricing determination, using an international sample of firms reporting under IFRS. The underlying hypothesis is that stronger vs. weaker enforcement should affect the informativeness of financial statements, due to their increased credibility, and thus results in a stronger influence of accounting quality on loan pricing, in case this information is considered more reliable by potential lenders. Evidence indicates that accounting quality is consequential for the determination of loan spread only in combination with the level of legal enforcement, and this only holds for the countries with stronger legal enforcement. This evidence indicates that financial statement quality information is value-relevant and has a significant impact on the determination of loan pricing only if this information is considered to be credible enough by loan providers in a country, and this is the case when legal enforcement is stronger.

This paper analyzes troubled banks' use of accounting discretion and its interaction with regulatory intervention in a time of financial distress. We analyze impairment losses that Europe's largest banks recognized on Greek Government Bonds (GGB) during 2011, the time during which GGB were considered impaired. Our findings reveal considerable variation in the impairment ratios across banks. Banks with larger GGB exposures, for which a full impairment would deplete a large share of regulatory capital, recognize significantly lower impairment ratios. Furthermore, we find that troubled banks delay full impairments until state aid is provided. Troubled banks recognize significantly lower impairment ratios in the quarter before they are provided with state aid, but substantially increase their impairment ratios afterwards. This pattern is consistent with the notion that troubled banks initially understate impairments to conceal the full extent of their financial difficulties from less sophisticated non-regulator outsiders (e.g., depositors and the general public), which increases regulators' ability to practice forbearance by not intervening immediately.

This study adds to the literature on mandatory rotation of audit partners in Chinese companies by examining the effect of the pre-rotation relationships between incoming and outgoing partners. We consider the rotating partners to have prior working relationship if they were cosigners of audit reports before the rotation. We find two different outcomes of having prior working relationship: (a) increasing the likelihood that outgoing partners rotate back after the cooling off period, and (b) lower audit quality improvement after rotation. These findings bring into question the extent to which rotating partners with prior working relationships are truly independent.

In this study, we use a sample of Chinese companies to examine the monitoring role of foreign directors in deterring earnings management. Our findings show that earnings management is significantly negatively associated with the presence and ratio of foreign directors on corporate boards. We further find that, under these conditions, earnings management is less pronounced in state-owned enterprises as compared to others. These findings are robust to various specifications of earnings management as well as to the approach used in matching the treatment and control samples. Interestingly, the negative impact of board membership of foreign directors on earnings management varies with audit quality, IFRS convergence, investor protection and the similarity or difference of the time zones of the foreign directors and China.