Despite the significant non-compliance with IFRS, most audit reports provide unqualified opinion which brings into question the audit quality in enforcing IFRS compliance. Therefore, the purpose of the study was to examine the antecedents of compliance with IFRS by focusing on the moderating effect of audit quality on the association of firm characteristics and IFRS compliance. The collection of data was done through quantitative content analysis of annual reports of 20 Zambian listed companies and Zambia Institute of chartered Accountants covering the years 2012 to 2018. Being a longitudinal study requiring panel data analysis, a Hausman test was done to choose the model to employ. The Hausman test showed that the random effect model was suitable. Results indicate that audit quality moderates the association of firm characteristics and IFRS compliance. Also, there was a positive association between firm size and compliance with IFRS. There was a negative association between firm profitability and compliance with IFRS. However, there was a statistically insignificant positive association between foreign investors, institutional investors, audit quality and IFRS compliance. The study suggests that large companies are expected to comply more with IFRSs and profitable firms withhold financial information. Audit quality was not impaired probably due to the size of the audit firms and international affiliation. Meanwhile, the influence of institutional investors and foreign investors on IFRS compliance was insignificant probably because both institutional and foreign investors in Zambian listed companies are transient investors without significant incentives to demand financial disclosures and they may have other means to access financial information. The financial reporting regulators should focus on enhancing audit quality for listed companies in Zambia and even in other African countries. Future research can focus on the relevance of IFRS disclosures to the domestic investors in Africa considering the cultural differences both at firm and national-level.
| Published in | Journal of Finance and Accounting (Volume 9, Issue 6) |
| DOI | 10.11648/j.jfa.20210906.12 |
| Page(s) | 216-229 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2021. Published by Science Publishing Group |
Audit Quality, IFRS Compliance, Firm Characteristics, Zambian Listed Companies
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APA Style
Martin Kabwe, Erastus Mwanaumo, Henry Chalu. (2021). Antecedents of IFRS Compliance: The Moderating Effect of Audit Quality. Journal of Finance and Accounting, 9(6), 216-229. https://doi.org/10.11648/j.jfa.20210906.12
ACS Style
Martin Kabwe; Erastus Mwanaumo; Henry Chalu. Antecedents of IFRS Compliance: The Moderating Effect of Audit Quality. J. Finance Account. 2021, 9(6), 216-229. doi: 10.11648/j.jfa.20210906.12
AMA Style
Martin Kabwe, Erastus Mwanaumo, Henry Chalu. Antecedents of IFRS Compliance: The Moderating Effect of Audit Quality. J Finance Account. 2021;9(6):216-229. doi: 10.11648/j.jfa.20210906.12
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Download@article{10.11648/j.jfa.20210906.12,
author = {Martin Kabwe and Erastus Mwanaumo and Henry Chalu},
title = {Antecedents of IFRS Compliance: The Moderating Effect of Audit Quality},
journal = {Journal of Finance and Accounting},
volume = {9},
number = {6},
pages = {216-229},
doi = {10.11648/j.jfa.20210906.12},
url = {https://doi.org/10.11648/j.jfa.20210906.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20210906.12},
abstract = {Despite the significant non-compliance with IFRS, most audit reports provide unqualified opinion which brings into question the audit quality in enforcing IFRS compliance. Therefore, the purpose of the study was to examine the antecedents of compliance with IFRS by focusing on the moderating effect of audit quality on the association of firm characteristics and IFRS compliance. The collection of data was done through quantitative content analysis of annual reports of 20 Zambian listed companies and Zambia Institute of chartered Accountants covering the years 2012 to 2018. Being a longitudinal study requiring panel data analysis, a Hausman test was done to choose the model to employ. The Hausman test showed that the random effect model was suitable. Results indicate that audit quality moderates the association of firm characteristics and IFRS compliance. Also, there was a positive association between firm size and compliance with IFRS. There was a negative association between firm profitability and compliance with IFRS. However, there was a statistically insignificant positive association between foreign investors, institutional investors, audit quality and IFRS compliance. The study suggests that large companies are expected to comply more with IFRSs and profitable firms withhold financial information. Audit quality was not impaired probably due to the size of the audit firms and international affiliation. Meanwhile, the influence of institutional investors and foreign investors on IFRS compliance was insignificant probably because both institutional and foreign investors in Zambian listed companies are transient investors without significant incentives to demand financial disclosures and they may have other means to access financial information. The financial reporting regulators should focus on enhancing audit quality for listed companies in Zambia and even in other African countries. Future research can focus on the relevance of IFRS disclosures to the domestic investors in Africa considering the cultural differences both at firm and national-level.},
year = {2021}
}
TY - JOUR T1 - Antecedents of IFRS Compliance: The Moderating Effect of Audit Quality AU - Martin Kabwe AU - Erastus Mwanaumo AU - Henry Chalu Y1 - 2021/11/10 PY - 2021 N1 - https://doi.org/10.11648/j.jfa.20210906.12 DO - 10.11648/j.jfa.20210906.12 T2 - Journal of Finance and Accounting JF - Journal of Finance and Accounting JO - Journal of Finance and Accounting SP - 216 EP - 229 PB - Science Publishing Group SN - 2330-7323 UR - https://doi.org/10.11648/j.jfa.20210906.12 AB - Despite the significant non-compliance with IFRS, most audit reports provide unqualified opinion which brings into question the audit quality in enforcing IFRS compliance. Therefore, the purpose of the study was to examine the antecedents of compliance with IFRS by focusing on the moderating effect of audit quality on the association of firm characteristics and IFRS compliance. The collection of data was done through quantitative content analysis of annual reports of 20 Zambian listed companies and Zambia Institute of chartered Accountants covering the years 2012 to 2018. Being a longitudinal study requiring panel data analysis, a Hausman test was done to choose the model to employ. The Hausman test showed that the random effect model was suitable. Results indicate that audit quality moderates the association of firm characteristics and IFRS compliance. Also, there was a positive association between firm size and compliance with IFRS. There was a negative association between firm profitability and compliance with IFRS. However, there was a statistically insignificant positive association between foreign investors, institutional investors, audit quality and IFRS compliance. The study suggests that large companies are expected to comply more with IFRSs and profitable firms withhold financial information. Audit quality was not impaired probably due to the size of the audit firms and international affiliation. Meanwhile, the influence of institutional investors and foreign investors on IFRS compliance was insignificant probably because both institutional and foreign investors in Zambian listed companies are transient investors without significant incentives to demand financial disclosures and they may have other means to access financial information. The financial reporting regulators should focus on enhancing audit quality for listed companies in Zambia and even in other African countries. Future research can focus on the relevance of IFRS disclosures to the domestic investors in Africa considering the cultural differences both at firm and national-level. VL - 9 IS - 6 ER -
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