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This paper attempts to investigate the effect of corruption on the real and accrual earnings management of target firms in the process of mergers and acquisitions.

The sample includes target firms from the European area that participate in mergers or acquisitions announced during 2010–2020. The preliminary empirical part estimates the level of earnings management during the period two years before the deal's announcement to identify whether the sample follows the manipulation behavior that the literature suggests for target firms. The primary empirical analysis focuses on the impact of corruption on real and accrual-based earnings management proxies, employing regression models and two alternative proxies for corruption. The existing literature points out that the combination of low levels of corruption and an integrated legal system reduces earnings manipulation.

The findings provide strong evidence for systematic downwards accounting manipulation practices, whereas the findings for real earnings management are not significant. The findings of the main empirical part show that corruption is positively associated with accrual-based manipulation and negatively related to real earnings management. In essence, in economies with a high level of transparency, managers adopt the manipulation of operating activities as a less detectable practice of earnings management instead of engaging in accounting procedures.

This study contributes to the literature highlighting the diversification of these firms' manipulation strategies according to the national level's corruption status.

This study aims to examines both accrual and real-based earnings management (EM) behavior of listed corporations in tax-free countries during different economic situations. It also addresses the link between firm- and country-level determinants of accrual and real-based EM and explores economic conditions' influence on these determinants.

The study examines 1,608 firm-years, covers sixteen years (2004–2019), clustered into three periods according to the global financial crisis (GFC): four years prior (2004–2007), two years during (2008–2009), and ten years post the GFC (2010–2019). We employ the modified Jones model (performance-matched) developed by Kothari et al. (2005) to measure the accrual-based EM (positive and negative discretionary accrual EM) and the three levels model for Dechow et al. (1998) to measure the real-based EM (cash flow from operating, discretionary expenses and abnormal production cost).

The study finds a significant increase in EM practices in the listed corporations in tax-free countries during the economic downturn. These corporations are found to understate their earnings during the economic stress period. Simultaneously, the firm-level determinants of EM practices were at the same level of significance during different economic conditions in accrual-based EM. In contrast, the country-level EM determinants vary based on the economic conditions.

Financial reports' users gain a deep understanding of the quality of financial reports in the context of tax-free country. And, the study outcomes inspire policymakers to develop relevant legislation to mitigate financial reports' risk and adequately protect the financial reports' users.

Purpose: This paper aims to study the impact of adoption eXtensible Business Reporting Language (XBRL) on earnings management.

Design/methodology/approach: This study uses a sample of all firms listed on the Indonesian stock exchange, except for finance and real-estate sectors from 2012 to 2019, with a total of 2,560 firms–years with panel data analysis.

Findings: Four findings in this study are listed as follow. First, the surprising result is that accrual earnings management increase after the adoption of XBRL. Second, after the adoption of XBRL, there was an increase in real earnings management. Third, the results of the study prove that the use of Big 4 auditors will weaken the increase in real earnings management after the adoption of XBRL. Finally, this study shows that after the adoption of XBRL, it turns out that both accrual and real earnings management experienced an increase.

Originality/value: This study contributes to providing an evaluation note to IDX regulators that the goals they want to achieve have not been achieved. This study provides empirical evidence for the debate over whether the adoption of XBRL is beneficial.

This study examines the effect of non-audit fees (NAF) provisions on interest payments classification shifting. In addition, we investigate to what extent the NAF economic bonding and interest payments classification shifting is contingent on internal governance and firm financial well-being.

This study employed probit regression using a sample of UK non-financial firms indexed in FT UK (500) over the period from 2009 to 2017.

We find evidence that the economic bonding of NAF between external auditors and their clients is more likely to encourage managers in UK firms to manipulate operating cash flows through interest payment classification shifting. In addition, and interestingly, our results evince that classification-shifting may be the less costly and soft choice of managers in firms with strong governance and charging higher NAF. Furthermore, we show that financially distressed firms associated with their auditors in purchasing non-audit services are more prone to attempting to manipulate and engage in interest payments classification-shifting. Our result did not provide a significant effect of external auditor tenure on the interest payments classification shifting.

Our findings are subject to the following limitations: First, this study uses a composite index to measure the quality of internal corporate governance. It focuses only on the board of directors, but this index does not reflect other internal governance mechanisms. Second, this study is subject to limited study time due to the implementation of key IFRS standards (IFRS 9 Financial Instruments and IFRS 15 Revenue from Contract with Customers) from 2018–2019.

This study was motivated by the UK’s Financial Reporting Council regulators' pressure on the Big 4 audit firms to move more audit time into main auditing activities, reduce cross-selling to audit clients and separate their audit practices by 2024. Overall, we provide new evidence that directs a close spotlight on the threats of NAF that are potentially useful to regulators, shareholders and investors.

It is motivated by the UK’s Financial Reporting Council regulators' pressure on the Big 4 to move more audit firm time into main auditing activities, reduce cross-selling to audit clients and separate their audit practices by 2024. Overall, we provide new evidence that directs a close spotlight on the threats of NAS that are potentially useful to regulators, shareholders and investors.

As the influence of institutional investors over managerial decision-making grows, so does the importance of understanding the effect of institutional investor ownership (IO) on firm outcomes. The authors take a comprehensive approach to studying the effect of IO on earnings management (EM).

The authors study the relation between IO and EM using a sample of 59,503 listed U.S. firm-year observations from 1981–2019. The authors proxy EM with earnings surprises and with accrual-based and real activity measures. The authors test for nonlinear relations and analyze changes resulting from the passage of the Sarbanes–Oxley Act.

The findings support a positive IO-EM relation overall, but show that the relation is dynamic and heavily context-dependent with evidence of nonlinearity. The authors also find evidence that IO positively affects accrual-based EM and real activities EM negatively.

To the authors’ knowledge, this is the first study of the IO-EM relation to consider evidence of nonlinearity in the U.S. context, measuring changes to the relation over time, and with the use of several measures of EM.

This paper documents the Government Accounting Standards Board (GASB) 34 literature, primarily in the areas of (1) accountability and improved reporting, (2) government-wide financial statements and accrual accounting and (3) infrastructure asset capitalization and the modified approach. The paper also evaluates the state of the research, recognizes implications for practice and standard setting, identifies knowledge gaps and proposes avenues for future research.

The authors identified the articles in this narrative review by searching Google Scholar and EBSCO for the years 2000 through 2023, using the keywords GASB 34, government-wide financial statements, government fund statements, infrastructure assets and modified approach.

This review finds that GASB 34 requirements improved accountability and reporting, but GASB can still make improvements. The addition of the MD&A section requirement improved readability but placed a burden on preparers. Analysis of government-wide statement research indicates that the accrual-based Statement of Net Assets provides value in credit decisions, while the accrual-based Statement of Activities does not. The research on infrastructure accounting requirements shows limited adoption of the modified approach and some comparability issues with choices involving capitalization thresholds, baselines and asset management systems (AMSs). Based on this review, the authors also present suggestions to further this line of research.

To the best of the authors’ knowledge, this is the first article that reviews over 20 years of GASB 34 related literature. The review and suggestions for future research are timely as GASB is in the process of reexamining some of GASB 34's requirements.

This paper aims to contribute to the debate over the desirability of introducing an accrual-based accounting system in the public sector by examining whether accrual-based accounting information is superior to cash-based information in the context of public sector entities.

This paper applies a quantitative research method to assess the degree of smoothness and relevance of the accrual components of income recorded by 302 entities of the Italian National Health Service (INHS) over the period 2014–2020.

The analysis reveals that net income is smoother than cash flows as a summary measure of economic results and that accounting for accruals improves the predictability of future cash flows. However, the authors' novel disaggregation of accrual accounts reveals that those accounts that contribute the most to making income smoother than cash flows – noncurrent assets and liabilities – are also those that contribute the least to predicting future cash flows.

The disaggregation of accrual accounts allows to identify the sources of the informational benefits of accrual accounting, and to document the existence of an informational “trade-off” between smoothness and relevance in the context of public sector entities.

This paper investigates to what extent public sector entities (PSEs) in developing countries (DCs) are compliant with IPSAS and examines the impact of the socioeconomic and politico-administrative environment on this compliance during the period 2015–2018.

This research develops a self-constructed checklist consisting of 116 disclosure items from five accrual-based IPSAS (IPSASs, 1, 2, 3, 14 and 24) and applies panel regressions for a sample of 500 entity-year observations of 125 PSEs.

The study results show a high level of disparity in the degree of compliance with IPSAS amongst DCs' governments, with an overall average level of 61%. They reveal that compliance with IPSAS is positively influenced by the level of citizen wealth, government political culture (degree of government openness) and the quality of public administration, whereas jurisdiction size, government financial condition and political competition are non-significant factors.

This research provides researchers and practitioners with a comprehensive framework for understanding the extent of New Public Management reforms in DCs with a focus on International Public Sector Accounting Standards implementation. It might assist policymakers in their accounting strategies and might be a signal for DCs with low compliance to tap lessons from governments with successful experience of IPSAS adoption.

Focusing on DCs' context, this paper brings new insights into the analysis of socioeconomic and politico-administrative incentives for government compliance with IPSAS. It is the first to investigate the impact of citizen wealth and political competition on IPSAS disclosures.

This article attempts to investigate the impact of COVID-19 outbreak on the earnings management (EM) for listed Tunisian companies.

The study focuses on both accrual-based and real EM (REM) practices. With panel data, the authors employ the multiple regression approach and the generalized least squares (GLS) estimate method. The sample is made up of 41 listed companies observed from the first half of 2016 to the second half of 2020.

This study finds that, during the pandemic period, Tunisian firms use decreasing income discretionary accruals. Also, with regard to REM, the COVID-19 variable displays a negative response coefficient but of lesser magnitude.

This study's findings can help Tunisian authorities, listed companies and market investors to better understand EM practices during a negative shock and to better understand the various internal and external factors influencing the quality of financial reporting. These findings may contribute, also, significant EM implications for scholars interested in other emerging markets. As limitations, the authors point out mainly to the small sample size used in this study and that the authors used a single model, namely the modified Jones model (1995), to measure the accounting EM. Also, the authors used a binary variable as a proxy for the COVID- 19 pandemic.

To the best of authors’ knowledge, it is the first in Tunisia, if not in Africa, to examine the impact of the COVID-19 pandemic on EM practices. Second, this study builds on previous work by examining both the accrual-based EM and the REM.

This study examines how bilateral international trade among mandatory International Financial Reporting Standards (IFRS) adopter countries moderates the relation between IFRS adoption and firms’ financial reporting quality.

The authors use data from 2007 to 2015 and focus on publicly listed firms from non-European Union countries that adopted IFRS on a mandatory basis.

The authors find that the interaction between mandatory IFRS adoption and a country’s bilateral trade with other countries using IFRS is negatively and significantly related to accruals-based earnings management, which is an inverse measure of financial reporting quality. This result is driven by firms in less developed countries. The improvement in accounting quality is for firms located in countries that both fully and partially adopt IFRS. The authors also find a significant and negative coefficient for the relation between real earnings management and the interaction between mandatory IFRS adoption and a country’s bilateral trade with other IFRS countries in the post-global financial crisis period.

Overall, the authors’ results are consistent with the notion that the mandatory adoption of IFRS creates a positive externality where firms improve their accounting quality because increased financial statement comparability means that foreign customers and suppliers can monitor the quality of earnings more easily.