The Impact of Regulatory Enforcement and Audit upon IFRS Compliance - Evidence from China

Jean Jinghan Chen and Haitao Zhang

European Accounting Review, 2010, vol. 19, issue 4, 665-692

Abstract: This study contributes to the accounting literature by providing empirical evidence from China that adopting IFRS does not necessarily lead to IFRS-type accounting practices. We examine the impact of regulatory enforcement, in particular, an important Chinese government compulsory compliance policy implemented in 2001, and audit upon the convergence of Chinese accounting practices. Using a sample of 103 Chinese B-share companies between 1999 and 2004, we reveal that the decline in earnings difference between firms' financial statements under Chinese GAAP and IFRS is the result of the implementation of the 2001 policy and the audit committee which effectively control the firm's application of standards rather than the differences between the standards. The effect of audit committee leads us further to argue that the convergence of accounting practices may be affected by not only the lack of insufficient understanding of IFRS by local accounting professionals, but also the management opportunistic behaviour during the application of different standards. It implies that corporate governance may affect the convergence of accounting practice. However, we do not find evidence for international audit firms outperforming their Chinese local CPAs with regard to IFRS compliance. Therefore, the Chinese government should be cautious in promoting the participation of international audit firms in China for achieving IFRS compliance.

Date: 2010
References: View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09638180903384684 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:euract:v:19:y:2010:i:4:p:665-692

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REAR20

DOI: 10.1080/09638180903384684

Access Statistics for this article

European Accounting Review is currently edited by Laurence van Lent

More articles in European Accounting Review from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().