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The authors investigate how managers adapt their financial reporting and disclosure practices in response to the COVID-19 pandemic through changes in accounting estimates (CAEs).

The authors define the pandemic period as starting on March 1, 2020. The sample consists of 9,575 CAEs disclosed in quarterly (10-Qs) and annual (10-Ks) financial reports by US firms between January 1, 2004 and May 31, 2022. The authors perform multivariate analyses of the impact of the COVID-19 pandemic on the incidence of CAEs and on whether the impact of CAEs on firms' financial performance and reporting quality changes during the pandemic.

In the examination of the CAE footnote disclosures in the quarterly (10-Qs) and annual (10-Ks) reports of US companies, the authors find no evidence that the incidence of CAEs in 10-Ks or the number of firms reporting CAEs are significantly different in the pre-pandemic and pandemic periods, but the incidence of CAEs in 10-Qs is significantly higher in the pandemic period than in the pre-pandemic period. The authors also find that the number of CAEs related to revenue recognition increase significantly in the pandemic period, but CAEs in other categories decrease, with the sharpest drop seen in the liabilities category. Further investigation suggests that although the dollar impact of 10-K CAEs on current financial statements is higher during the pandemic period, firms with CAEs, especially positive CAEs, in either 10-Ks or 10-Qs are less likely to use CAEs to boost earnings in the pandemic period. However, the authors find evidence that firms tend to use CAEs to “big bath” current earnings and create reserve for future period. The authors have not observed any significant differences in how the various phases of the pandemic affect the reporting of CAEs. Additionally, there is no evidence to suggest that financially distressed firms report more or fewer CAEs during the pandemic.

The results are consistent with the notion that, during the pandemic, firms exercise greater caution in their CAE disclosures, refraining from using CAEs as a means of boosting earnings but as a strategy to create reserve for future period. The paper highlights the challenges that various stakeholders face when assessing a company's current and future financial performance based on management's accounting estimates.

This study captures the impact of the COVID-19 pandemic on the incidence of CAEs and CAEs' impact on the financial performance and financial reporting quality of firms during the pandemic.

This study aims to examine the association between Iranian auditors' narcissism and the auditors' professional skepticism.

The authors' sample is comprised of 355 professional auditors working in the private and public sectors in Iranian firms in 2022. The authors use cross-sectional multivariate regression as the main methodology, along with the structural equation modeling (SEM) technique.

The authors find that a higher level of narcissism leads to a greater level of professional skepticism among auditors, which ultimately can enhance the quality of the audit process. The results provided via the robustness tests also supported this finding.

The authors' findings further the understanding of the role of narcissistic personality traits in improving professional skepticism among auditors of an Islamic and emerging country. In addition, audit firms and audit partners can also consider the findings of this study and enhance the effectiveness of audit processes by assigning appropriate employees with certain personalities to specific tasks.

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.

Exploiting an innovative measure of corporate culture based on machine learning and earnings conference calls, this study aims to investigate how corporate culture is influenced by hostile takeover threats. To sidestep endogeneity, this study uses a unique measure of takeover vulnerability principally based on the staggered implementation of state legislations, which are plausibly exogenous.

In addition to the standard regression analysis, this study also executes a variety of other empirical tests such as propensity score matching, entropy balancing and an instrumental variable analysis, to demonstrate that the results are robust. The final sample includes 27,663 firm-year observations from 4,092 distinct companies from 2001 to 2014.

This study documents that more takeover exposure weakens corporate culture considerably, consistent with the managerial myopia hypothesis. Threatened by the takeover risk, managers tend to behave myopically and are less likely to make long-term investments that promote strong corporate culture in the long run. Additional analysis focusing on a culture of innovation, which is especially vulnerable to managerial myopia, produces similar evidence.

To the best of the authors’ knowledge, this study is the first to explore the effect of takeover susceptibility on corporate culture using a distinctive metric of corporate culture based on textual analysis.

This study examined subjective numeracy and its relationship with accounting judgements on probability issues.

A subjective numeracy scale (SNS) questionnaire was distributed to 231 accounting students to measure self-evaluated numeracy. Modified Bayesian reasoning tasks were applied in an accounting-related probability estimation, manipulating presentation formats.

The study revealed a positive relationship between self-evaluated numeracy and performance in accounting probability estimation. The findings suggest that switching the format of probability expressions from percentages to frequencies can improve the performance of participants with low self-evaluated numeracy.

Adding objective numeracy measurements could enhance results. Future numeracy research could add objective numeracy items and assess whether this influences participants' self-perceived numeracy. Based on this sample population of accounting students, the findings may not apply to large populations of accounting-information users.

Investors' ability to exercise sound judgement depends on the accuracy of their probability estimations. Manipulating the format of probability expressions can improve probability estimation performance in investors with low self-evaluated numeracy.

This study identified a significant performance gap among participants in performing accounting probability estimations: those with high self-evaluated numeracy performed better than those with low self-evaluated numeracy. The authors also explored a method other than additional training to improve participants' performance on probability estimation tasks and discovered that frequency formats enhanced the performance of participants with low self-evaluated numeracy.

After the effective date of International Financial Reporting Standard (IFRS) 15, the accounting treatment of credit card rewards programmes (CCRPs) is no longer explicitly prescribed. Uncertainty regarding what constitutes faithful representation, and the inconsistent accounting practices observed, has created a need for guidance on the appropriate accounting treatment of CCRP transactions. Accounting theory has the potential to provide the foundation for this guidance. As a result, the objective of this study was to develop a theoretical model for the accounting treatment of CCRP transactions using accounting theory.

This non-empirical qualitative conceptual study utilised document analysis, focussing specifically on accounting theory, to construct an accounting treatment model.

Applying the relevant accounting theory (International Accounting Standards Board's (IASB's) Conceptual Framework), a theoretical model for the accounting treatment of CCRP transactions was developed, which emphasises the importance of understanding the economic phenomenon (the CCRP transaction) and determining how management views the transaction (in isolation as marketing or as an integral part of the credit card transaction).

Addressing the problem of accounting for CCRP transactions with reference to accounting theory (which is the main element of scholarly activity in accounting) distinguishes this study from previous research on the topic. The CCRP accounting treatment theoretical model could assist CCRP management in faithfully accounting for a CCRP transaction and reduce uncertainty and inconsistency in practice. Moreover, this study identified the procedures to be employed when using accounting theory to determine the appropriate accounting treatment of business transactions. These procedures could be employed by accountants when faced with other transactions not covered by specific accounting standards.

The paper aims to provide empirical evidence of the impact of IFRS adoption on the value relevance of accounting information in the emerging market of Saudi Arabia.

The sample consists of 98 non-financial listed firms operating in Saudi Arabia from 2014 to 2019, representing the years before and after IFRS adoption. The authors apply basic and extended price models to examine the value relevance of select accounting figures.

The authors findings provide evidence that accounting information is, generally, value relevant to the Saudi Arabian capital market. However, mixed results exist for particular accounting variables. Both earnings and cash flows are value-relevant in the period before and after IFRS adoption; equity is only relevant in the post-adoption period. Furthermore, IFRS adoption also increases the explanatory power of earnings. An increase in the value relevance of earnings and equity hurts the value relevance of cash flows. The effects are moderated by leverage and dividend policy.

The authors contribute to the ongoing discussion of the economic effects of IFRS adoption in emerging markets. The empirical findings show that initial concerns about IFRS adoption, as reflected by the negative coefficient within the regression analysis, are mitigated once the usefulness of the individual accounting variables published in financial statements is investigated.

An understanding of the role of decision-making has been emphasised since the seminal works on human information processing and professional judgements by accountants. The interest in these topics has been reignited by the increasing digitisation of the financial reporting and auditing processes. Whilst the behavioural research on accounting is well-established, the application of seminal works in cognitive psychology and behavioural finance is lacking, especially from recent research endeavours. The purpose of this paper is to provide a synthesis of theories relating to accounting behavioural research by evaluating them against the theories of cognitive psychology.

Using theory synthesis, this research draws seemingly isolated strands of research into a coherent framework, underpinned by cognitive psychology.

Evidence from accounting and auditing behavioural research is largely consistent with the psychology and finance research on cognitive limitations and errors. There remains a lacuna in accounting behavioural research on debiasing techniques. Such research, if underpinned by a single, cohesive theoretical framework, is likely to have practical relevance.

The current research has theoretical implications for the accounting decision-making and uncertainty research. Areas for future research, based on identified gaps in the current accounting behavioural research, are also proposed.

This paper aims to assess the factors that may explain the International Public Sector Accounting Standards (IPSAS) convergence, considering Hofstede’s cultural dimensions as the theoretical reference for the cultural approach proposed. Additional factors include countries’ contextual and macroeconomic characteristics.

Logistic and probit regression models were used to identify the factors that may explain the IPSAS (fully or adapted) use by countries, including 166 countries in this assessment (59 for those whose cultural dimensions are available).

The findings consistently indicate collectivism and indebtedness levels as explanatory factors, providing insights into cultural dimensions along with macroeconomic characteristics as a relevant factor of countries’ convergence to IPSAS.

There are different levels of IPSAS convergence by countries that were not considered. This aspect may hide different countries’ characteristics that may explain those options, which could not be distinguished in this paper.

As a result of this paper, the International Public Sector Accounting Standards Board may gain insights that can be applied within the IPSAS due process to overcome the main challenges when collaborating with national authorities to achieve a high level of convergence. This analysis may include how to accommodate countries’ cultural differences as well as their contextual and macroeconomic characteristics.

There is a trend of moving toward accrual-based accounting standards by countries. Because the public sector embraces a new culture following the IPSAS path, it is relevant to assess if there are cultural factors, besides contextual and macroeconomic characteristics, that may explain the countries’ convergence to those standards.

To the best of the authors’ knowledge, this is the first cross-country analysis on the likely influence of cultural dimensions on IPSAS convergence as far as the authors’ knowledge.

This study investigates the consequences of the key audit matter (KAM) disclosure requirement by considering two salient audit proxies: audit fees and audit report lag. This investigation is relevant because most auditors worldwide are required to expand their audit report including discussion on key matters faced in the audit engagement. However, the emerging literature on the implications of KAM is inconclusive.

Using a distinctive dataset of 601 year-observations for firms listed on the Omani capital market over 2012–2019, this study employs pooled panel data regression with robust standard error.

Results indicate that auditors increased their fees considerably during the period of KAM but substantially shortened audit report lag. Conversely, using the KAM period as a sample, the authors find marginal or insignificant evidence for the effect of the number of KAM on both proxies. In additional analyses, this study shows that entity-level risk KAM is associated with higher fees and shorter audit report lag, while KAM related to account-level risk does not have the same effect. Interestingly, it is observed that KAM disclosure is strongly associated with higher fees and high-quality audit even when the auditors issue their report in a shorter time.

This study contributes to the limited research examining the consequences of KAM in emerging markets. It is also the first to show that KAM is associated with shorter audit report lag.