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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.

This chapter investigates the effect of moral reasoning of tax professionals on the aggressiveness of their reporting recommendations. The findings of the study indicate moral reasoning influences the aggressiveness of tax reporting decisions separate from the influence of client pressure. As the level of moral reasoning increases, the aggressiveness of the reporting position is found to0 decrease. Contrary to prior research, client pressure is not related to tax reporting aggressiveness. Failure to observe this relationship may signal a shift in behavior resulting from the intense public and regulatory scrutiny at the time of data collection which was in the immediate aftermath of the Enron scandal.

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.

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 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.

Tax professionals in public accounting firms must meet professional standards in working with their clients, but may also face pressure from both their clients and firms when making ethical decisions. The purpose of this study is to examine the influence of client factors on tax professionals’ ethical decision-making. Furthermore, we also investigate how client service climate and different ethical climate types affect these ethical decisions. Based on an experimental design with 149 practicing tax professionals, results indicate that tax professionals are not swayed by client importance or social interaction with the client when making ethical decisions. However, tax professionals are more likely to engage in ethical behavior when their own accounting firm monitors and tracks the quality of client service, whereas unethical behavior is more common when public accounting firms emphasize using personal ethical beliefs in decision-making. The results of the study suggest the importance of strong policies and procedures to promote ethical decision-making in firms.

We investigate the association between attributes of the audit committee of a firm and the likelihood of negative events occurring in the firm’s life in Israel. The mandate of the audit committee in Israel is substantially different from its mandate in the US. The responsibilities of the committee in the US are divided between two committees in Israel, one of which deals with reviewing the financial statements and the other one, titled “audit committee,” is in charge of the remaining tasks of the US-type audit committee. This allows us a unique opportunity to focus on the roles of the audit committee other than reviewing the financial statements. Using hand-collected data on firms traded on Tel Aviv Stock Exchange in 2010–2014, we find that the larger the audit committee size, the larger the likelihood of negative events, consistent with the cumbersome workings and potential conflicts of interests characterizing a large committee. The percentage of directors with accounting and financial expertise on the audit committee is associated with a lower likelihood of negative events, in line with the value of such experts in tasks beyond reviewing the financial statements. The fraction of independent directors on the audit committee is not found to be significantly related to the likelihood of negative events. This is consistent with the notion that some independent directors are independent in form but not necessarily in substance, which is surprising in light of the comprehensive regulation regarding audit committee independence imposed by the Israeli regulator.

This chapter investigates the relationship between related party transactions (RPTs), corporate governance, and firm performance. Specifically, this chapters examines the moderating effect of corporate governance on the RPTs–performance relationship. On the basis of 448 firm-year sample for 2005–2007, we find evidence that related transactions are detrimental to shareholders and thus reducing firm performance. However, the negative effect is mitigated with the presence of good governance, namely level of board independence and executive remuneration. Furthermore, we find auditor size as an external governance mechanism could also reduce the negative impact of RPTs.

Myopic going concern practice refers to the current audit going concern opinion that a firm is rewarded a favorable going concern opinion as long as it has the capability to satisfy its debt obligation in the following year. We show, via a structural agency problem we develop in the paper, that such a practice has a potential economic cost to the firm. We study Lucent Technologies Inc. in detail for its loss in economic value and also measure the magnitude of this impact with 500 companies. We find that Lucent should have lost its going concern status in 2002 as it had to sell off its assets to meet debt obligations and nearly 18% of the 500 firms suffer some degree of economic loss due to the agency problem.