IFRS and Enforcement on Audit Quality: Incorporating the Mediating Effect of Audit Fees
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2017-08-15
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en
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This study examines the relationship between mandatory IFRS adoption, the level of enforcement within a country, and the audit quality with a mediation effect of audit fees. It extents current research by arguing that the mechanism that underlies the linkage between IFRS adoption and the level of enforcement on audit quality is the fees paid to auditors. The study period examined was 2003-2007 (the period around the mandatory IFRS adoption) and covered 2,479 firms located in European countries. Measuring audit quality by the probability of a restatement and the discretionary accruals the results show the audit fee is a mediator in the relationship between mandatory IFRS and audit quality. However, this holds only for discretionary accruals used as measurement for audit quality. Using the probability of any restatement as measurement there are no significant results. One limitation of this study is that the audit fee data contains a lot of missing observations, causing the relative representation of the countries is disproportionate and making hard conclusions is not possible. Therefore this study is more or less an explorative one: it wants to give new insights regarding the linkage between mandatory IFRS adoption and the level of enforcement on audit quality.
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Faculteit der Managementwetenschappen