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We analyze the economic consequence of government intervention on the incidence of accounting fraud and audit fees of both Big 4 and local big auditors on Chinese audit market in the period 2006–2013. In 2009, Chinese government issued favorable polices to local big auditors and required certain Chinese companies to give priority to these auditors. We find that market share of Big 4 auditors is quite stable before and after government intervention, but market share of local big auditors increases at the cost of local small auditors after intervention. Although audit fee premiums of both local big and Big 4 auditors have increased after intervention, the positive effect of local big auditors on audit fee premiums has significantly decreased. Further, both Big 4 and local big auditors are not likely to reduce the incidence of accounting fraud in pre- and post-intervention period. Our results suggest that Chinese government support to local auditors does not significantly enhance these auditors’ competitiveness in terms of audit fee and audit quality.

The chapter shows how globalization and the IFRSs have affected the development of financial accounting and reporting in Estonia. This is interpreted through institutional theory.

The theoretical framework takes into account the prior papers published using institutional theory for defining pressures affecting the development of financial reporting model. The discussion part is presented in three sub-sections. Coercive institutional pressure is analyzed using Estonian accounting legislation from 1990–2012 and normative pressure by focusing on the impact of Big 4 audit companies in the Estonian context. The authors also give an overview of mimetic institutional pressures. As a methodological technique literature review and document analysis are used.

In the context of coercive institutional pressure the development of accounting legislation in Estonia has been mostly influenced by the IFRSs and European Union. In the light of recent events it seems that Estonia has the opportunity to follow its own way deciding which accounting principles should be applied to SMEs. Mimetic institutional pressure affecting Estonian accounting system is International Accounting Standards Board (IASB), which practices Estonian Accounting Standards Board (EASB) copies. Normative institutional pressures influencing the development of the Estonian accounting system are the Big 4 audit firms.

Although using institutional theory to interpret the development of financial reporting framework is not new its application is underexplored in the context of post-Soviet countries such as Estonia. The chapter potentially contributes to the accounting reforms evidence in emerging economies.

This study extends prior cross-cultural research by examining the effects of both cultural and noncultural factors on the judgments of professional accountants. It examines the extent and the cause of differences in judgments of professional accountants in Australia and Fiji when interpreting and applying selected International Financial Reporting Standards (IFRS). A comparative study between these two countries, which have both adopted IFRS, provides empirical evidence that IFRS are not interpreted and applied consistently. It supports the views that: (a) both national culture and organizational culture (Big 4 and non-Big 4 firm affiliations) have a significant effect on the manner in which professional accountants in a country interpret uncertainty expressions contained in IFRS; and (b) national culture and organizational culture interact to influence the judgments of professional accountants. Further, the results of the effects of noncultural factors on the judgments of professional accountants in Australia and Fiji show that the professional accountants' perceived level of task complexity has a significant effect on their judgments. An important implication of this study is that the adoption of IFRS in different countries alone may not result in uniformity in financial reporting as IFRS may not be consistently applied by those countries because of differences in cultural as well as noncultural factors.

This study extends prior research on accounting judgment and decision-making research by examining the effects of “new” and “complex” accounting standards on judgments of professional accountants. It examines whether there are differences in the judgments of professional accountants in Fiji when interpreting and applying selected IFRS. A significant within-country difference in such judgments has serious implications for the convergence of accounting standards. The results show that the interpretation and application of accounting standards is affected by the complexity of the accounting standard and the professional accountant's familiarity with that standard. The study also finds strong support for the existence of an interactive effect of familiarity with the accounting standards and their complexity on the judgments of professional accountants. Furthermore, the results show that differences in judgments exist between the Big 4 and non-Big 4 professional accountants when they are provided with new accounting standards that require complex judgments. The results of this study are of interest to stakeholders at a time when IFRS are increasingly being adopted throughout the world and standard setters are struggling to promote compliance with those standards.

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.

In this study, we examine the relationship between political connections of private firms and the initial public offering process. Using registration statement information, we create a unique database of politically connected IPO firms. We find that political connections are substitutes to high-quality underwriters and big four auditors. Politically connected firms manage earnings more highly upward than non-connected firms prior to the public offering. Politically connected firms also exhibit less underpricing than non-connected firms. Finally, politically connected IPO firms have superior post-IPO returns relative to non-connected IPO firms.

Prior research finds evidence that audit quality is positively associated with the joint purchase of tax nonaudit services (NAS) and concludes that jointly provided tax services result in audit-related knowledge spillovers that lead to improved audit quality. We extend this line of research. We examine the relation between auditor-provided tax services and restatements and determine whether this relation differs when the auditor is a small or large accounting firm. We also examine whether the Securities Exchange Commission’s restrictions on certain tax consulting practices (SEC, 2006) altered this relation. Specifically, we measure whether the probability of financial statement restatements varies with (1) variation in accounting firm size (measured as PCAOB annually inspected firms versus PCAOB triennially inspected firms), and (2) the joint provision of audit and tax services. We find a negative relation between auditor-provided tax services and restatements which is consistent with prior research. We also find that this relation is significantly more negative when the auditor is a small accounting firm. Finally, we find that the lower probability of a restatement associated with the joint provision of audit and tax services persists regardless of auditor size after the SEC-imposed restrictions on certain tax consulting services in 2006. Our study provides evidence that accounting firms, and particularly small accounting firms, benefit from knowledge spillovers when jointly providing audit and tax services and these benefits lead to improved audit quality. Prior research concludes that large auditors provide higher audit quality and that the provision of tax services improves audit quality. Our results provide evidence that audit quality improvements are greater for small auditors and their clients. This improvement narrows that audit quality gap between large and small auditors. We do not find evidence that the SEC’s restrictions on certain tax consulting services altered the relation between audit quality and tax services.

This chapter focuses on the international aspects of auditing in the context of the airline industry for the year 2018. This chapter finds that International Standards on Auditing have been widely adopted in the global context. This chapter also analyses several observations related to the composition of audit firms (Big 4 vs. non-Big 4), types of audit opinions, emphasis of matter, other matters, material uncertainty related to going-concern, and types of auditors (single or joint auditor). This chapter covers the frequency of the four elements of describing key audit matters (KAM) in the audit reports in the global and auditor context as well as the KAMs observed in the airline industry and classifies them as industry-specific KAMs and entity-specific KAMs. In addition, this chapter analyses the requirements of the expanded audit report of the UK which includes the declaration of materiality threshold and scope of the audit in connection with the materiality and KAMs considering UK and non-UK airlines.

The sociology of professions literature has theorized that the professions are undergoing a dramatic transformation from being traditional professions to “entrepreneurial professions” populated by “knowledge workers.” In part, this transformation is associated with the commodification and commercialization of professional endeavor.

Our purpose is to enlist the processual ordering perspective to examine the ongoing transformation of the Big 5 (and following the collapse of Arthur Andersen during our field study)/4 public accounting firms to become entrepreneurial firms populated by global knowledge experts. More specifically, we focus on the inter-play of power and meta-power across three moments of the social construction process – externalization, objectivation, and internalization – through which the ethos of entrepreneurialism is being socially constructed within these firms, their individual members, and in the public accounting profession. Finally, we explore impressions gleaned from our qualitative, naturalistic field study.