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The current study uses an advanced machine learning method and aims to investigate whether auditors perceive financial statements that are principles-based as less risky. More specifically, this study aims to explore the association between principles-based accounting standards and audit pricing and between principles-based accounting standards and the likelihood of receiving a going concern opinion.

The study uses an advanced machine-learning method to understand the role of principles-based accounting standards in predicting audit fees and going concern opinion. The study also uses multiple regression models defining audit fees and the probability of receiving going concern opinion. The analyses are complemented by additional tests such as economic significance, firm fixed effects, propensity score matching, entropy balancing, change analysis, yearly regression results and controlling for managerial risk-taking incentives and governance variables.

The paper provides empirical evidence that auditors charge less audit fees to clients whose financial statements are more principles-based. The finding suggests that auditors perceive financial statements that are principles-based less risky. The study also provides evidence that the probability of receiving a going-concern opinion reduces as firms rely more on principles-based standards. The finding further suggests that auditors discount the financial numbers supplied by the managers using rules-based standards. The study also reveals that the degree of reliance by a US firm on principles-based accounting standards has a negative impact on accounting conservatism, the risk of financial statement misstatement, accruals and the difficulty in predicting future earnings. This suggests potential mechanisms through which principles-based accounting standards influence auditors’ risk assessments.

The authors recognize the limitation of this study regarding the sample period. Prior studies compare rules vs principles-based standards by focusing on the differences between US generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) or pre- and post-IFRS adoption, which raises questions about differences in cross-country settings and institutional environment and other confounding factors such as transition costs. This study addresses these issues by comparing rules vs principles-based standards within the US GAAP setting. However, this limits the sample period to the year 2006 because the measure of the relative extent to which a US firm is reliant upon principles-based standards is available until 2006.

The study has major public policy suggestions as it responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US Securities and Exchange Commission (SEC), to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the International Accounting Standards Board (IASB) Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks such as climate change.

The study has major public policy suggestions because it demonstrates the value of principles-based standards. The study responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US SEC, to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information as business transactions and investor needs continue to evolve globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the IASB Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks like climate change. The study fills the gap in the literature that auditors perceive principles-based financial statements as less risky and further expands the literature by providing empirical evidence that the likelihood of receiving a going concern opinion is increasing in the degree of rules-based standards.

This paper aims to conduct an experiment that investigates the effect of the ambiguity present in international financial reporting standards (IFRS) on the judgments of auditors. This paper also examine the effects of the personality trait of ambiguity tolerance on judgments of auditors.

This paper conduct an experiment in which experienced Australian-based auditors are placed in hypothetical revenue recognition and lease classification decision contexts. The participants are members of the Australian accounting profession who are familiar with applying IFRS.

This paper find support for the perception that when the relevant IFRS are more ambiguous, auditors make less aggressive reporting judgments compared to when the IFRS are less ambiguous. The results also unveil a novel finding that auditors who are more tolerant of ambiguity are likely to choose the accounting treatment that best reflects the economic substance of a transaction when interpreting IFRS compared to those who are less tolerant of ambiguity.

These results would be of interest to policymakers and accounting researchers as they continue to contemplate a shift to more principles-based IFRS.

To the best of the authors’ knowledge, this study is the first to examine the influence of an individual’s ambiguity tolerance on financial reporting quality in jurisdictions that have adopted IFRS.

This paper aims to investigate the association between negative tone in annual report narratives and future performance in the UK context. Under the principle-based approach in the UK, managers tend to bias the tone of narrative reports upward, as the reporting regime is more flexible than the rule-based approach in the USA. Consequently, any negative disclosure not mandated by regulators conveys credible information about a firm’s prospects.

This paper uses a sample of UK FTSE all-share non-financial companies from 2010 to 2019. The authors use the textual-analysis approach based on Loughran and McDonald (2011)’s wordlist (LM) to measure the negative tone in UK annual reports.

The results show a significant negative association between negative tone and future performance. Moreover, our further analyses suggest that only the negativity in the executive section of the annual disclosures correlates significantly with future performance. In summary, this study suggests that negativity does matter under the principle-based approach and can be used as an indicator of future performance.

In contrast to the literature arguing that only positivity has the power to affect a firm’s outcomes under the principle-based approach, the authors provide new empirical evidence suggesting that negativity also matters within the UK context and can be used as an indicator for future performance. Also, to the best of the authors’ knowledge, this is the first study to identify which section of the annual report is more informative about a firm’s future performance.

This paper aims to examine the extent to which performance indicators (PIs) reported by New Zealand (NZ) higher education institutions (HEIs) correspond with accounting standards and guidance and the effects issuance of principles-based authoritative guidance and early adoption of Public Benefit Entity Financial Reporting Standard 48 (PBE FRS 48) have on the PIs disclosed.

Using a content analysis index derived from accounting standards and guidance, we conduct a longitudinal assessment of the 2016 and 2019 statements of service performance published by 22 NZ HEIs.

The PIs reported extend beyond the service performance elements proposed by standard-setters. Despite few indicators on intermediate and broader outcomes, the measures disclosed by HEIs are reflective of their role in the NZ economy and the national Tertiary Education Strategy. The results show that principles-based authoritative guidance and early adoption of PBE FRS 48 influence the focus and type of measures disclosed, while there is no evidence of improvements in the reporting of impacts, outcomes and information useful for performance evaluation.

This paper provides timely insights for standard-setters and regulators on the influence principles-based accounting standards and guidance have on non-financial reporting practices.

This study contributes to the scant literature on HEIs’ service performance reporting. It presents a model for conceptualising HEIs’ PIs that can be used as a basis for future research on non-financial reporting. It also reflects on the tension between accountability and “accountingisation”, suggesting that, although the PIs reported support formal accountability, they do not communicate whether HEIs’ activities and outputs meet their social purpose.

This paper aims to investigate whether the two dominant financial reporting regimes, US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS), are associated with audit pricing and audit report lags.

In 2007, the US SEC eliminated the requirement for foreign registrants to reconcile their financial statements to US GAAP from IFRS. In this post-reconciliation setting in the USA, the authors use panel ordinary least square regressions to examine a sample of foreign firms cross-listed in the USA reporting under IFRS and US domestic firms reporting under US GAAP during the fiscal year 2007–2019.

The authors find that the firms reporting under IFRS have longer audit report lags than firms reporting under US GAAP. In addition, the authors find that firms reporting under IFRS pay higher audit fees than their US GAAP counterparts. The results are robust after controlling for the firm- and country-specific characteristics as well as using propensity-score matching.

To the best of the authors’ knowledge, this study is the first to provide empirical evidence that the differences between the two reporting regimes are associated with auditor behavior, possibly through additional audit efforts and audit complexity associated with auditing the principle-based IFRS relative to the rule-based US GAAP.

The purpose of this study is to construct and test a new measure of auditor orientation using two audit quality-related tasks.

The sample consists of 66 Dutch and US graduate auditing students. Participants complete two tasks: one involving a lease classification and another, supplemental experiment involving a contingent liability judgment. The purpose is to construct a new measure for rules-based/ principles-based orientation. Rigorous, psychometric testing confirms that parts of tolerance for ambiguity (TOA) and need for cognition (NFC), together, form a new construct the authors identify as auditor orientation. The authors next conduct a main and supplemental experiment with novice auditor participants from both the USA and the Netherlands.

The authors begin with rigorous, psychometric testing using participants from the USA and the Netherlands. The resulting 10-item scale combines parts of TOA and NFC to reflect auditor orientation. The common themes across scale items are high (low) adaptability to complexity and a substance-over-form (form-over-substance) preference for principles-oriented (PO) (rules-oriented [RO]) auditors. Conducting two experiments, results from two distinct tasks confirm our research question; novice auditors classified as RO (PO) are more (less) likely to recommend a more aggressive/client-favorable disclosure judgment.

Auditor orientation (i.e. rules or principles) has a significant impact on the application of rules-based or principles-based standards. How the standards are applied, therefore, influences auditor decision-making and thus audit quality. However, there is a paucity of auditor orientation research to date, including a validated measure. The study contributes a new measure for future research in the related accounting standards and audit quality literatures, while also identifying a potentially important construct in auditor training.

This study aims to identify effective behaviors in labor-management negotiation (LMN) and, on that basis, derive overarching psychological principles of successful negotiation in this important context. These empirical findings are used to develop and test a comprehensive negotiation training program.

Twenty-seven practitioners from one of the world’s largest labor unions were interviewed to identify the requirements of effective LMN, resulting in 796 descriptions of single behaviors from 41 negotiation cases.

The analyses revealed 13 categories of behaviors critical to negotiation success. The findings highlight the pivotal role of the union negotiator by illustrating how they lead the negotiations with the other party while also ensuring that their own team and the workforce stand united. To provide guidance for effective LMN, six psychological principles were derived from these behavioral categories. The paper describes a six-day training program developed for LMN based on the empirical findings of this study and the related six principles.

This paper has three unique features: first, it examines the requirements for effective LMN based on a systematic needs assessment. Second, by teaching not only knowledge and skills but also general psychological principles of successful negotiation, the training intervention is aimed at promoting long-term behavioral change. Third, the research presents a comprehensive and empirically-based training program for LMN.

This paper analyzes and compares segments disclosure practices of listed companies of Pakistan and Bangladesh under International Financial Reporting Standard (IFRS) 8 with companies from India under Accounting Standard 17 over three-year period from 2013 to 2015. Furthermore, the purpose of this paper was to investigate that how the selection of chief operating decision-maker (CODM) by management, industry type, governance and firm characteristics affects segments disclosure practices in South East Asia. Finally, how the relationship among segment disclosure, firm characteristics and corporate governance is moderated through the big 4 audit firm.

To achieve these objectives, data were collected from annual reports of the top 100 companies of each country and selected based on market capitalization for three years period 2013–2015.

Results state that majority of companies in South East Asia are using business class for defining operating/primary segments. Regarding reporting of operating/primary segments and geographic/secondary segments along with geographic fineness score, Indian companies are continuously on the lower side as compared to companies from Pakistan and Bangladesh. Furthermore, it was found that industry type and selection of CODM have a highly significant effect on segments disclosure practices. Finally, results of regression analysis found that the application of IFRS 8 in Pakistan and Bangladesh has a significant positive effect on disclosure of operating/primary as well as geographic/secondary segments as compared to India. Further, the role of corporate governance mechanism in influencing segments disclosure was found as least in South East Asia. Further appointment of big 4 audit firm as external auditor has only significant positive effect on disclosure of segments items. Finally, based on additional analysis, it was found that big 4 auditor moderates the relationship only in the case of reporting of operating/primary segments.

Based on these results, the performance of Indian companies regarding disclosure of operating/primary segments, geographic/secondary segments along geographic fineness score is quite low despite the fastest growing economy in the world. This raises concerns about the quality of segment reporting in India, the world’s fastest expanding economy.

These results imply that there is a need of an effective role by the external auditor to improve the quality of segment reporting in developing countries, which is principle based.

Status distinctions matter among heterogeneous organizations within a socio-environmental field. This is exemplified in the food waste field, where six types of organizations employ different excess strategies to address the issue. Theoretically, we propose that status is constructed internally through advice relationships and externally through evaluations. We posit that organizations conducting evaluations and advocating legitimate principles based on expertise (i.e., Others) are status winners. Our mixed-method study confirms that Others hold privileged positions and identifies status inconsistencies. By critically illuminating these status dynamics, we contribute to a better understanding of the roles of organizations and status in tackling socio-environmental issues.

This study aims to merge the world’s proven ways of housing finance, including musharakah mutanaqisah, housing cooperatives and real estate crowdfunding, to present an alternative housing unaffordability solution based on the Islamic finance principle. It is intended to reduce the burden of funding for both sides (consumers and developers) and create win–win chances for all stakeholders, including intermediaries. By moving away from debt financing and merging the features of crowdfunding and cooperative, it is hopeful that the burden of home ownership will no longer be the case.

This paper presents the opinions of potential Chinese homebuyers (minority Muslims and most non-Muslims) and a few industry experts toward the proposed model via a mixed research method.

According to the findings, the majority of respondents agreed with the proposed paradigm. Just concerned that China’s lack of community culture and trust could pose a major threat to implementation. However, this paper argues that Chinese local governments may perform pilot testing in places where Islamic culture is prevalent. Their unique community culture and fundamental understanding of Shariah law may affect the viability of the proposed model.

The proposed model would increase the applicability of Islamic finance as a way of protecting the social order of communities in the spirit of upholding justice and fairness. A new type of housing loan based on musharakah mutanaqisah may squeeze out the real estate bubble and provide stakeholders with a multidimensional investment channel. In particular, the study identifies the impact of Chinese Islamic financing on government and cultural needs. It presents possible challenges for implementing the proposed model in reality and helps bridge the gap between theory and practice.