A Review and Analysis of International Accounting Research in JIAAT 2002 2010 2010 Journal of International Accounting, Auditing and Taxation

Journal of International Accounting, Auditing and Taxation 19 (2010) 137153
Contents lists available at ScienceDirect
Journal of International Accounting,

Auditing and Taxation
A review and analysis of international accounting research in JIAAT:

20022010
Hans J. Dykxhoorn, Kathleen E. Sinning
Haworth College of Business, Western Michigan University, Kalamazoo, MI 49008, USA
a r t i c l e
i n f o
Keywords:
Content analysis
Author analysis
International accounting
a b s t r a c t
During the period 20022010, authors whose research was published in the Journal of International Accounting, Auditing and Taxation extended the international accounting literature
by 82 articles and six special studies. The purpose of this paper is to summarize these additions and analyze the types of topics and methodologies the authors used to enhance our
understanding of the international accounting issues facing the accountancy profession.
The analysis also will help international accounting researchers identify areas for future
investigation.
2010 Elsevier Inc. All rights reserved.
1. Introduction
The Journal of International Accounting, Auditing and Taxation (JIAAT) was founded in 1992 to disseminate research that is
relevant to the development of the eld of international accounting. The journals goal is to publish manuscripts in the areas of
nancial accounting, auditing, taxation, management advisory services, and accounting information systems, among others,
that are of interest to academics and practitioners.1 A study published by Adhikari, Tondkar, and Hora (2002) analyzed
the research published in the journal during the period of 1992 and 2001 and determined that over half of the articles
dealt with the topic of nancial accounting and reporting and about a third with auditing and taxation. It also revealed that
papers focusing on multinational operations appeared most frequently, reecting the increasing importance of international
business and the internationalization of capital markets.
Since 2001, a number of important events have taken place that affected international accounting. In 2002, the United
States (U.S.) Securities and Exchange Commission (SEC) announced its support of the Norwalk Agreement between the
International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to develop high
quality accounting standards for domestic and cross-border nancial reporting. In the same year, the European Commission
adopted the use of International Financial Reporting Standards (IFRS) for all listed companies in member states for years
beginning on or after January 1, 2005. In July 2002, the U.S. enacted the Sarbanes-Oxley Act, which expanded the disclosures
of nancial and non-nancial control measures of rms and increased the responsibilities of audit committees and auditors
as well. Sections of the act apply to international as well as domestic controls. In November 2007, the SEC voted to permit
foreign lers to present nancial statements prepared in accordance with IFRS without reconciliation to U.S. Generally
Accepted Accounting Principles (GAAP). A roadmap was proposed by the SEC in November 2008 to allow U.S. issuers to
prepare their nancial statements in accordance with IFRS. The SEC announced in February 2010, however, that it would
commit to a new plan that would delay a move to IFRS until at least 2015 or 2016 for rst time users (Securities and Exchange
Corresponding author.
E-mail address: kathleen.sinning@wmich.edu (K.E. Sinning).
1
Editorial policy of the Journal of International Accounting, Auditing and Taxation published by Elsevier.
1061-9518/$ see front matter 2010 Elsevier Inc. All rights reserved.
doi:10.1016/j.intaccaudtax.2010.07.005
138
H.J. Dykxhoorn, K.E. Sinning / Journal of International Accounting, Auditing and Taxation 19 (2010) 137153
Table 1
Frequency of topics published by JIAAT, Volumes 1119 (20022010).
Topic
Frequency
Relative frequency
Financial accounting and reporting

Taxation
Auditing
Managerial
Accounting information systems
Special studies
Total published
51
14
12
4
1
6
88
0.58
0.16
0.14
0.04
0.01
0.07
Commission, 2010). On March 16, 2010, in a prepared statement at the meeting of the Economic and Financial Affairs Council
(ECOFIN), Sir David Tweedie announced that the IASB was still on track to meet its June 2011 goal of nishing a common
set of nancial rules and completing the convergence process. More than 115 countries had adopted IFRS at the time of the
announcement.
Despite and because of these events, there are still many differences among countries in the areas of nancial accounting,
auditing, taxation, and managerial accounting, differences that continue to make comparisons of results of operations and
nancial conditions among companies difcult. The objective of this study is to determine how, if at all, the focus of research
published in JIAAT changed during the past nine years. The study also will organize and summarize these additions to the
literature to help authors identify areas for future research.
This article is organized as follows: Section 2 analyzes the publications in JIAAT by topic, methodology, and international
perspective; Section 3 presents a review of each of the publications from the period 20022010; and Section 4 provides a
summary and discussion of possible directions for future research.
2. Analysis of publications
During the period 20022010, 18 issues of JIAAT were published that included 82 articles and 6 special studies. An
analysis of the research topics, the methodologies used to conduct the studies, the international perspectives presented in
the research, and the authorship of the articles is presented below.
2.1. Analysis of topics
According to Adhikari et al. (2002), over half (58%) of the articles appearing in JIAAT during its rst 10 years of publication
dealt with issues in nancial accounting and reporting. As shown in Table 1, the relative frequency of articles dealing
with nancial accounting remained the same for the 20022010 period. Adhikari et al. (2002) also found that auditing
articles comprised 20% and taxation articles 12%, respectively, of the publications in JIAATs rst 10 years. Table 1 reveals
that articles dealing with taxation comprised 16% of the total published while auditing articles made up 14%. Managerial
accounting articles made up 4% of the articles published in the 20022010 period, which was half the relative frequency
during the period 19922001. It should be noted that no education or government and not for prot articles were published
during 20022010, but an article dealing with accounting information systems appeared. Adhikari et al. (2002) reported that
coverage of education and government and not for prot topics was low and declining over the rst 10 years of publication.
2.2. Analysis of methodologies
The types of methodologies used in the papers published in JIAAT were empirical, survey, and descriptive methods.
Empirical research included studies that tested hypotheses through observations. Survey research used a questionnaire
or interviews to determine respondents perceptions or opinions while descriptive studies included reviews, historical
analysis, and discussions. Table 2 shows that empirical methods were used in approximately 76% of the studies and surveys
or interviews were used in about 21% of the research. Adhikari et al. (2002) noted that there was a trend toward greater use of
Table 2
Frequency of methodologies used in articles published in JIAAT (excluding special studies) Volumes 1119 (20022010).
Topic
Financial
Tax
Auditing
Managerial
AIS
Total
Relative frequency
Methodology
Empirical
Survey
Descriptive
Total
44
10
7
1
0
62
0.756
5
4
4
3
1
17
0.207
2
0
1
0
0
3
0.037
51
14
12
4
1
82
1.000
139
Table 3
Frequency of topics published by JIAAT by international perspective (excluding special studies) Volumes
1119 (20022010).
Topic
Country study
Financial
Taxation
Auditing
Managerial
AIS
Total
Comparative study
Financial
Taxation
Auditing
Managerial
AIS
Total
International business
Financial
Taxation
Auditing
Managerial
AIS
Total
Universal
Financial
Taxation
Auditing
Managerial
AIS
Total
Total
Frequency
Relative frequency
34
4
10
1
0
49
0.42
0.05
0.12
0.01
0
0.60
9
10
2
3
0
24
0.11
0.12
0.02
0.04
0
0.29
7
0
0
0
1
8
0.09
0
0
0
0.01
0.10
1
0
0
0
0
1
82
0.01
0
0
0
0
0.01
1.00
empirical methodologies in international accounting research. The increased emphasis on the use of empirical methodologies
was reected in the articles published in JIAAT as well.
2.3. Analysis of international perspective
Adhikari et al. (2002) analyzed the international dimension of papers published in JIAAT using the categories of country,
comparative, international business, and universal studies. That classication is used in this paper also. Country studies
analyze accounting issues in a single country while comparative studies evaluate differences or similarities in accounting
issues or practices between or among two or more countries or regions. Articles classied as international business studies
are those that deal with accounting practices of multinational operations while universal studies deal with theories or
concepts that apply globally.
Country studies comprised 60% of the articles published in JIAAT during the 20022010 period, as indicated in Table 3.
Many of the country studies focused on the challenges and benets arising from the convergence to international accounting
standards. Of the 49 papers dealing with a single country, nine dealt with accounting issues in China and four focused on
issues in Hong Kong. The focus on accounting practices in China is understandable since its economy as well as the level of
foreign investment in its rms expanded dramatically during this period.
Comparative studies made up 29% of the articles published in JIAAT during 20022010. Articles dealing with taxation
accounted for 10 of the 24 comparative studies and focused mainly on effective tax rates and efforts to minimize tax
evasion. Papers dealing with international business and universal accounting topics made up the remaining 11% of the
articles published.
2.4. Analysis of authorship
The articles published in JIAAT during 20022010 were written by 150 authors from universities or organizations in 19
countries. Authors from the U.S. (63), China (16), U.K. (15) and Canada (11) were the most frequent contributors, although
authors from many regions of the world published their research in JIAAT, as shown in Table 4.
The authorship of the articles published in JIAAT is presented in Table 5. The table shows that 19 articles (23%) had single
authors. Eight of the authors (10%) were from universities or organizations outside the U.S. while 11 of the authors (13%)
were from the U.S. This result is similar to the ndings of Adhikari et al. (2002), who determined that 23% of the articles were
single authored during the rst 10 years of publication of JIAAT. The remaining 63 articles (77%) published in JIAAT during
20022010 were co-authored, with 21 of the papers (26%) co-authored by U.S. authors, 34 (41%) by non-U.S. authors and
140
Table 4
Location of authors of articles published by JIAAT in Volumes 1119
(20022010).
Country
Number of authors
United States
China
United Kingdom
Canada
Netherlands
Australia
Spain
Japan
Norway
Belgium
Denmark
Finland
Germany
Greece
Malaysia
New Zealand
Singapore
Costa Rica
Korea
63
16
15
11
8
7
6
3
3
2
2
2
2
2
2
2
2
1
1
Number of countries
Number of authors
19
150
8 (10%) by authors from universities and organizations in and outside the U.S. While the frequency of papers co-authored
by non-U.S. authors increased for the 20022010 period to 41% as compared to the 27% found by Adhikari et al. (2002),
the frequency of articles co-authored by U.S. and non-U.S. co-authors decreased to 10% as compared to the 19% found by
Adhikari et al. (2002). It should be noted, however, that seven of the articles co-authored by non-U.S. authors had co-authors
from different countries. Therefore 15 of the articles (18%) were the result of collaboration by co-authors from different
countries. Adhikari et al. (2002, p. 46) note that this type of collaboration creates a multi-country perspective in accounting
research.
3. Review of the literature in JIAAT
As noted above, the articles and special studies published in JIAAT during 20022010 dealt with topics in six broad
categories. A review of the articles indicates that a wide variety of issues were investigated within the six topics.
3.1. Financial accounting and reporting
3.1.1. Information usefulness/value relevance
Olibe (2002) analyzed the effect of U.K.-based annual general meetings on security returns and investors trading in the
U.S. market. He found that the annual meetings reected information that was useful to U.S. market participants but that
U.S. investors may have lacked easy access to these meetings. He recommended that the SEC require rms listed on U.S.
exchanges to publicly announce the annual general meeting dates in the U.S. media.
Nichols and Buerger (2002) studied the effects of differing methods of valuing xed assets for nancial reporting purposes
on decision makers in the U.S. and Germany. They analyzed whether or not the method of valuing xed assets (historical cost
versus fair value) or the country the nancial statement user was from had an effect on credit decisions made by bank loan
Table 5
Frequency of articles published in JIAAT by authorship (excluding special studies) Volumes 1119 (20022010).
Topic
Financial
Tax
Auditing
Managerial
AIS
Total
Methodology
Single author U.S.
Single author non-U.S. Co-authors U.S.
Co-authors non-U.S.
Co-authors U.S.
and non-U.S.
Total
7
4
0
0
0
11
9
5
0
0
0
14
3
5
0
0
0
8
4
6
0
0
0
10
16
2
2
1
0
21
20
2
2
1
0
25
21
3
8
2
0
34
26
4
10
2
0
42
4
0
2
1
1
8
5
0
2
1
1
9
51
14
12
4
1
82
62
17
15
5
1
100
141
ofcers. The research involved an experiment in which the loan ofcers were given a complete set of nancial statements for
a ctitious company. The results indicated that U.S. bankers granted signicantly higher loans to companies using historical
cost while German bankers granted signicantly higher loans to companies using fair value accounting for xed assets. The
authors concluded that cultural differences might inuence users preferences for valuation methods and recommended
that nancial statements disclose both methods to meet user needs on a global basis.
Kang (2003) used U.S. stock prices of Japanese and U.K. rms cross-listed in the U.S. to provide further evidence about the
association between legal regime in the country of domicile and the value relevance of accounting information. He examined
whether differences in the properties of accounting information (supply effect) or differences in the way investors interpreted
and applied the information (demand effect) drove the association. The regression results indicated that the supply effect
applied and that the legal regime of a rms country of origin did have a marginal effect on the value relevance of accounting
information.
Fox, Grinyer, and Russell (2003) studied U.K. and International Accounting Standards to determine if regulators have
promulgated standards that are internally consistent and facilitate the interpretation of rms performance. Their analysis
indicated that at the time of the study, U.K. and international accounting regulators developed standards that were based
on conicting theoretical concepts and resulted in net income measures that were not meaningful to users because they
mixed valuation-based and matching-based approaches.
Chung, Ho, and Kim (2004) analyzed whether or not discretionary accruals were useful for assessing the market value of
Japanese industrial rms listed on the Tokyo Stock Exchange. The research extended the literature on accruals by evaluating
whether or not the ownership structure, in particular cross-held corporate structure, and nancial structure of a rm affected
the valuation of accruals. Their results showed that discretionary accruals conveyed information that improved the value
relevance of earnings. The results also indicated, however, that the market in Japan did not value the discretionary accruals
of nancially distressed companies and discounted the discretionary accruals of highly cross-held rms.
Hora, Tondkar, and McEwen (2004) used a regression model to examine whether the reconciliation to U.S. GAAP of
selected nancial data of foreign rms affected the trading volume of capital markets participants, an indicator of information
usefulness. Their results indicated that market participants used the reconciliations in trading decisions. The results for the
period 19881995 found that the disclosure of a foreign rms reconciled earnings was associated with abnormal trading
volume. The study provided evidence that the reconciliation process provided additional information above that found in
the foreign GAAP earnings announcement.
Coppens and Peek (2005) tested whether private rms in eight European Union member states engaged in earnings
management during the period 19931999. The countries included in the study were those for which data availability was
the highest. Earnings management was measured by comparing the earnings distributions of private rms with the earnings
distributions of public rms in the same countries. The results of the study indicated that private rms managed earnings
to avoid losses even without the pressures of capital markets. The authors also provided evidence that in countries where
tax regulation affected nancial accounting, private rms did not avoid reporting even small losses. The authors concluded
that the usefulness of private companies accounting information varied substantially throughout the EU.
Lin and Chen (2005) examined the incremental value relevance of the reconciliation of accounts from the Chinese Accounting Standards to the international accounting standards for Chinese listed companies with both A- and B-shares. Their results
showed that earnings prepared under the Chinese standards were more value relevant in explaining stock prices in the Aand B-share markets. At the aggregate level, the reconciliation of earnings and shareholders equity from the Chinese to
international accounting standards added value only for stock in the B-share market.
Goodwin and Ahmed (2006) conducted a large sample study of the value relevance of earnings in Australia for the period
19751999. The goal was to determine whether or not value relevance was affected by the capitalization of intangibles.
The results showed that although there was weak evidence of a decline in earnings value for the average rm, the value
relevance of earnings and book value increased more over time for rms that capitalized intangibles than for rms that did
not capitalize intangibles.
Olibe (2006) studied the response of U.S. investors to non-U.S. GAAP earnings that were disclosed only or initially in
the U.K. He used price and trading volume to assess the usefulness of the preliminary earnings announcements. The results
indicated that U.S. investors were not confused by the differences between the U.S. and U.K. generally accepted accounting
principles and used U.K. GAAP earnings in their investment decisions.
Myring (2006) investigated the association between earnings and returns using a one-month return window for a sample of rms from 32 countries that were grouped into accounting regimes. Accounting standards, corporate governance
mechanisms, economic conditions, and stock market characteristics were the factors used to determine regimes. The results
showed a signicant market reaction to the earnings announcements in all regimes, suggesting that accounting information
is relevant to investors worldwide. The study found an increase in the signicance of changes in earnings per share and analyst forecast errors, which the author noted could be the result of improvements in corporate governance and accounting
standards.
Callao, Jarne, and Lainez (2007) examined the effect the adoption of IFRS had on the usefulness of nancial reporting
in Spain. The study looked at two of the key characteristics of usefulness, the comparability and relevance of nancial
reporting, by testing for signicant differences in the nancial gures and ratios calculated on the basis of the Spanish
and international accounting standards for Spanish listed companies. Signicant differences were found when IFRS rather
than Spanish accounting standards were applied in the preparation of nancial information. The authors concluded that
142
comparability was worsened by the use of IFRS and that there was no improvement in the relevance of nancial reporting
to Spanish markets.
Habib (2008) investigated the relative and incremental information content of earnings versus cash ows for rms in
New Zealand, an environment in which listed companies have concentrated ownership. The study did not nd a statistically signicant difference between the explanatory power of earnings and cash ows. Both earnings and cash ows had
incremental information content for stock valuation.
Gjerde, Knivsa, and Saettem (2008) examined the usefulness of accounting information under IFRS for investors in
rms listed on the Oslo Stock Exchange. The study looked at the nancial statements prepared using Norwegian Generally
Accepted Accounting Principles and restated using IFRS for 145 rms in Norway. The authors tested whether the IFRS gures
correlated more strongly with market values than those determined using the Norwegian principles. The results indicated
marginal value relevance of adopting IFRS due to the use of fair values on the balance sheet and the effects of the capitalization
of intangibles on net operating income.
Shuto, Otomasa, and Suda (2009) studied the relative information content of dirty surplus accounting by testing the
association between the cost of debt of Japanese companies and dirty surplus items on their balance sheets. The focus of
the study was on the usefulness of the information for bond contracting rather than on the relevance of the information in
equity valuation. The results showed that foreign currency translation adjustments had relative and incremental powers in
explaining the spread between corporate bond and government bond rates. Unrealized gains and losses on securities had
only incremental information content while land revaluation surplus had no information content. The authors concluded
that the Japanese requirement to disclose each dirty surplus item separately was important from the perspective of the bond
market.
Navarro-Garcia and Bastida (2010) surveyed the nancial statement preparers of Spanish listed rms to determine their
perceptions of the appropriateness of IFRS for decision making in a code-law country. The results indicated that IFRS were
not considered to be more appropriate than Spanish accounting standards. The chief accountants and nancial managers
perceived IFRS to be high quality but complex and too exible. The survey respondents noted that costs to comply with
the standards were increased due to disclosure requirements and outweighed the perceived benets, including enhanced
international comparisons.
Iatridis and Rouvolis (2010) evaluated the value relevance of IFRS nancial statements for Greek listed rms and examined
the factors associated with the provision of voluntary disclosures. The results indicated that IFRS-based nancial statement
measures had higher value relevance than those prepared under Greek GAAP. The study also determined that rm size and
level of nancing were positively associated with the provision of voluntary IFRS disclosures.
3.1.2. Financial statement disclosures
Street and Nichols (2002) examined pre- and post-International Accounting Standard 14 Revised segment disclosures for
a sample of 210 companies that referred to the use of international accounting standards. The goal was to determine whether
the revision of the standard addressed user concerns about segment disclosures. The ndings determined that there was
a signicant increase in the disaggregated data (the number of items of information disclosed for primary and secondary
segments of business) provided to users of nancial statements. It found, however, that some companies continued to
misreport that they operated in only one line of business while their annual reports suggested the existence of multiple
business segments.
Seese and Doupnik (2003) examined the effect that two possible materiality benchmarks had on the usefulness of individual foreign country disclosures required by Statement of Financial Accounting Standards No. 14. The experiment used
nancial analysts as subjects and tested how the benchmarks affected the analysts judgments about rm risk. The benchmarks were suggested as possible ways to determine the materiality of operations in a foreign country and included the
percent of total operations located in a country and the level of risk associated with the country. The study disclosed that
differences in the percent of operations located in a specic country affected risk judgments only when the country was of
medium risk. The results also indicated that the judgment of rm specic risk was affected by the disclosed level of country
risk, regardless of whether the countries were located in Europe or the Asian-Pacic region. The authors recommended
that to provide the most relevant disclosures, rms should consider the level of country risk in determining whether the
operations in a particular country are material.
Hossain and Marks (2005) evaluated the information content of the mandatory quarterly disclosure of foreign sales data
for U.S. multinational companies. The study analyzed companies that voluntarily disclosed the data prior to the imposition
of the requirement and those that did not. The results showed that the requirement had no information content in the
rst year of implementation for companies that did not disclose the information prior to the effective date but did in
the remaining years of the study. The quarterly foreign sales data did have information content for companies that had
voluntarily disclosed the data prior to the mandatory implementation. The authors suggested that since many companies
did not voluntarily provide quarterly geographic sales data, standard setters should consider requiring the disclosure of that
information as well.
Tsakumis, Doupnik, and Seese (2006) presented evidence to explain the diversity in geographic area disclosure practices. The authors examined whether the potential competitive harm associated with geographic area disclosures provided
an incentive for managers of U.S. rms with foreign operations to present less detailed geographic area information. The
regression results showed that even after controlling for the number of countries in which a rm operated, rm size, and
143
prior reporting practices, rms with greater exposure to competitive harm disclosed less detail about country specic
revenue.
Nichols and Street (2007) used the nancial statements from 160 companies in 15 countries to examine the relationship
between rm choice to separately disclose a business segment and industry competition after the adoption of International
Accounting Standard 14 Revised. They hypothesized that companies would be less likely to separately disclose segment
operations when segment performance exceeded industry averages. The results showed a signicant negative relationship
between company returns compared to global industry returns and disclosure of segment operations. They concluded that
the standard still provided managers with the ability to aggregate segment operations to conceal information concerning
excess returns and recommended that the IASB reduce this exibility.
Abd-Elsalam and Weetman (2003) analyzed the effect of familiarity and language accessibility on International Accounting Standards disclosures when the standards were rst adopted by an emerging market country. The authors studied a
sample of annual reports of companies listed in Egypt and applied a disclosure index measure to determine the relationship
between corporate characteristics and compliance after the adoption of international accounting standards. They determined
that when the IAS requirements were available in Arabic, the level of compliance with familiar aspects of the international
standards was signicantly higher than the level of compliance with relatively unfamiliar disclosure requirements. They
also found that compliance with relatively unfamiliar IAS disclosure requirements was lower when the regulations were
not available in Arabic. A lower degree of compliance occurred with less familiar IAS requirements regardless of company
characteristics. The type of audit rm used was related to the extent of compliance with less familiar IAS requirements. The
authors stressed the importance of ensuring that changes in international accounting standards be accessible in approved
translations for all countries to enhance compliance.
Lajili and Zghal (2005) tested the association between market values and human capital information, such as the voluntary disclosure of labor costs and non-nancial data including productivity and efciency of labor use. The study revealed
a positive and signicant relationship between labor cost disclosures and market values of stock, indicating that investors
used the information in valuing rms. It also showed that measures of productivity and efciency were negatively associated with market values. The authors concluded that additional, more rened human capital disclosure is needed so that
investors can assess rms human resource decisions and the effects on performance more adequately.
Mohd Ghazali and Weetman (2006) studied the factors associated with voluntary disclosures by Malaysian companies
following the 1997 nancial crisis in southeast Asia. They were interested specically in how ownership, board structure,
and industry competitiveness affected the level of voluntary disclosure in 2001, the year a Malaysian corporate governance
code became effective. Their results showed that there was no signicant change in the factors associated with voluntary
disclosure. Director ownership and family control of the board of directors continued to have the strongest impact on the level
of voluntary disclosure. The results also indicated that industry competitiveness did not affect the level of disclosure. The
authors concluded that regulatory efforts to enhance corporate transparency were not achieved for closely held businesses.
Petersen and Plenborg (2006) evaluated whether or not the level of voluntary disclosure affected information asymmetry
for Danish companies. The study looked at the voluntary disclosures during 19972000 of 62 issues deemed important to
nancial analysts and investors and found that fewer than 21% of the issues were disclosed in annual reports. The results
showed that in Denmark, voluntary disclosure was negatively associated with two metrics for information asymmetry, the
bid-ask spread and the turnover ratio. The authors noted that despite a different institutional setting in Denmark, the results
were similar to those of past studies of voluntary disclosures based on U.S. data.
Wang and Claiborne (2008) examined the association between voluntary disclosures and the cost of debt of Chinese
publicly traded companies and explored the determinants of voluntary disclosures in their annual reports. The data indicated
that extensive voluntary disclosure did not result in a lower cost of debt capital for Chinese listed rms that issued both
domestic and foreign shares. The study found that the level of voluntary disclosure was positively associated to the percentage
of state ownership, foreign ownership, return on equity, and the reputation of the rms auditor. The results indicated that
there was a substantial gap in terms of the extent of voluntary disclosure between Chinese companies and those in developed
economies.
Chau and Gray (2010) investigated the relationship between levels of family ownership, board independence, and chairman independence and the extent of voluntary disclosures by rms in Hong Kong. The study found a positive association
between the appointment of an independent chairman and the level of voluntary disclosure. The results also indicated
that the number of independent non-executive directors was related positively to the level of voluntary disclosure but was
mitigated by the appointment of an independent chairman. Low levels of family ownership were related to low levels of
disclosure while higher levels of family ownership were associated with higher voluntary disclosures. The authors noted
that the results should be of interest to policy makers in other east Asian countries characterized by highly concentrated
ownership structures.
3.1.3. Executive compensation
Street and Cereola (2004) studied the impact of expensing employee stock options on the key performance indicators of
companies domiciled outside the U.S. but listed on U.S. exchanges. They analyzed the pro-forma stock option disclosures
provided by almost 300 rms from Australia, the U.K., Canada, France, Germany, Japan and Ireland for the year 2000. The
research found that although the results varied signicantly by country, recognition of expenses associated with stock option
compensation had a material impact on the key performance measures of rms in the study.
144
Chalmers and Godfrey (2005) presented evidence about how the IFRS requirement to expense the fair value of stock
option compensation would affect Australian rms. They found that more than half of Australias largest rms were affected
by the accounting requirement and that a third of the rms with option grants had not disclosed the fair value of the options.
They concluded that this accounting change associated with adopting IFRS was signicant and that rms needed to consider
how to deal with the adverse effect of the change on reported earnings.
Shuto (2007) contributed to the literature on earnings management by focusing on the relationship between executive
compensation and discretionary accounting choices in an international context. The results showed that the use of discretionary accruals increased executive compensation for managers of Japanese rms. He concluded from the results that
although earnings management behavior is considered opportunistic when it is used for compensation purposes, it can also
be viewed as efcient contracting.
3.1.4. Firm characteristics and accounting choice
Landry and Callimaci (2003) used a logit model to examine how the decision by Canadian rms to capitalize research
and development (R&D) spending was inuenced by cross-listing and rm characteristics including leverage, size, return
on equity, and cash ow from operations. The results showed that the probability of a rm capitalizing R&D costs increased
regardless of the cross-listing status. The authors believed this result occurred because Canadian rms adopted U.S. accounting practices to ease nancial statement comparison. The analysis also indicated that the probability of capitalizing R&D
increased with leverage, age of the rm, and higher levels of cash ow from operations. The probability of capitalizing
decreased for larger rms, those with more concentrated ownership, and rms with higher returns on equity.
Abd-Elsalam and Street (2007) studied the relationship between corporate governance characteristics and the timeliness
of corporate Internet reporting by U.K. companies. They determined that corporate boards with more experience, shorter
length of service of executive directors, and less cross directorships provided more timely internet reporting. They also
found that timely reporting was negatively associated with board independence, block ownership, and duality of the roles
of chairman of the board and CEO. The results showed that U.K. listed companies did not provide investors with the most
current information nor with quarterly data. The authors suggested that U.K. rms were not signaling a commitment to
timely reporting to users.
Machuga and Teitel (2009) analyzed the relationship between earnings quality and board characteristics of Mexican rms
listed on the Mexican Stock Exchange. The goal was to determine if the quality of earnings improved in a business environment characterized by family control after the enactment of a corporate governance code. The results showed that there
were no differences in changes in earnings quality for rms that did or did not disclose information about the composition
of the board. Changes in earnings quality were associated negatively with family control and shared directors. The authors
concluded that the corporate governance code did not meet the goal of improving the quality of earnings.
3.1.5. Analyst forecasts
Hodgdon, Tondkar, Harles, and Adhikari (2008) documented the relationship between rm compliance with IFRS disclosure requirements and analysts earnings forecast errors. The results from a sample of non-U.S. rms showed that individual
analysts forecast errors were negatively related to IFRS compliance. The study presented evidence that when rms provided
the nancial disclosures required by IFRS, they benetted since nancial analysts were better able to predict earnings that
were relevant to valuing rms securities.
Habib and Hossain (2008) presented evidence concerning rms management of earnings and analyst forecasts in Australia. The study extended the literature on managers attempts to meet or beat analyst forecasts to a market with a different
type of legal environment than that found in prior studies. The study used analyst forecast data for the period 19952004
and found that rms did not use discretionary accruals to manage earnings to meet or beat analysts forecasts.
Barniv (2009) studied whether or not analyst expertise and effort affected earnings forecast accuracy differently for shares
traded only by Chinese investors than shares traded only by foreign investors. The results indicated that increased analyst
effort and expertise affected forecast accuracy more signicantly for shares traded only by foreign investors. The study also
showed that forecast accuracy increased as foreign investor ownership increased. The author concluded that foreign investor
demand, spurred by access to less information, motivated analysts.
Yu (2010) tested the relationship between analyst forecast accuracy, forecast dispersion, analyst following, and the
governance disclosures in the annual reports of U.S. and non-U.S. rms. The evidence showed that analysts incorporated
the information from the governance disclosures in their earnings forecasts and improved their forecast performance when
there was greater corporate governance disclosure. The author concluded that proposals by regulators worldwide to enhance
corporate governance disclosures are important and should be mandatory.
3.1.6. Progress towards convergence
Larson and Street (2004) analyzed the progress towards convergence with IFRS in 17 European countries. At the time of
the study, the EU had decided that beginning in 2005, all listed companies in member states had to prepare consolidated
accounts based on IFRS. The authors used and updated the data collected by six international accounting rms in a 2002
study of convergence. The analysis revealed that few of the 17 countries studied intended to require IFRS for non-listed
companies. The authors concluded that a two-standard system of nancial reporting was emerging in a majority of the 17
European countries.
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De la Rosa, Crawford, and Franz (2004) described the development of the Warsaw Stock Exchange and Polands accounting
system for the period 19912000, a time of unprecedented political and economic change for this emerging market. They
determined that accounting and auditing regulation had accelerated and would continue to change as Poland prepared
to become a member of the European Union. They also analyzed the returns for publicly traded Polish rms during this
period and found that rms experienced a speculative bubble whether or not their nancial statements were audited by an
international accounting rm.
Jermakowicz and Gornik-Tomaszewski (2006) surveyed publicly traded companies in the European Union to gain insight
into the process of implementing IFRS. Responses were received from 112 companies in 2004 that were early adopters of
IFRS. The results revealed that the major challenges to implementing IFRS included a lack of implementation guidance and
uniform interpretation of IFRS and a complex, costly, burdensome conversion process. The respondents believed that lower
costs of capital, an expected benet of the change, would not occur if their subsidiaries were required to prepare nancial
statements based on local GAAP that varied from IFRS.
Haverty (2006) investigated the convergence of IFRS and U.S. GAAP during the period 19962002 using a sample of companies from China that were listed on the New York Stock Exchange. Because the Chinese companies in the sample prepared
IFRS nancial statements and provided a limited reconciliation to U.S. GAAP, the author was able to examine differences
between two sets of accounting numbers prepared using different accounting standards. The study found progress had been
made towards convergence and harmonization but revealed material differences in reported net income. The author noted
that the revaluation of xed assets under IFRS, which caused higher depreciation to be reported, was the most signicant
reason for the lack of comparability.
Peng and van der Laan Smith (2010) performed a longitudinal analysis of the process of convergence of Chinese GAAP
with IFRS for the period 19922006. The study found that Chinese regulators directly imported standards from IFRS for
standards that were similar to those already in the Chinese accounting system. The Chinese regulators made progressive
changes to converge with IFRS standards that were signicantly different than those in the Chinese accounting system. Areas
in which convergence had not yet taken place included those in which IFRS permitted exibility. The authors concluded that
the process was an effective, practical way to make the transition from accounting under a central government planning
model to accounting in a market-based model.
3.1.7. Other
Cormier and Magnan (2002) examined the performance reporting by oil and gas rms in Canada. The goals were to assess
how the rms nancial reporting was affected by earnings management, to evaluate which performance metrics were
relevant for valuation purposes, and to determine if U.S. listing inuenced managerial incentives for earnings management.
Their study found only weak evidence that oil and gas rms engaged in earnings management and determined that a U.S.
listing does lead to more conservative nancial reporting. Their results also showed that, consistent with other research
ndings, cash ow from operations was the dominant performance metric in valuing oil and gas rms.
Emmanuel and Oyelere (2002) examined the relative performances of foreign-controlled domestic companies operating
in the United Kingdom (U.K.) and U.K.-controlled domestic companies operating during the ve-year period 19901994.
Their study revealed that foreign-controlled rms had signicantly lower median protability gures than U.K.-controlled
domestic companies of comparable size and industry. They posited that the foreign-controlled companies may be paying
higher prices for goods and services with added intangibles. Their ndings corroborated those of earlier U.S. based studies.
Pinto (2003) examined U.S. utility companies that acquired foreign utilities after the enactment of the Energy Policy Act
in 1992 to determine the effect of international diversication on the performance and valuation of U.S.-based multinational
utility companies. Using an earning-and-book value model, the study showed that multinational utilities reported lower
absolute and relative rates of protability than domestic utilities and had higher levels of systematic risk for the period
19962000. It also determined that book value had less inuence on the valuation of multinational utilities than on domestic
utilities and earnings played a more important role for the valuation of multinationals. The results indicated that nonaccounting information appeared to be priced into the equities of multinational utilities compared to domestic utilities.
Nikkinen and Sahlstrm (2004) investigated the effect of accounting environment on the usefulness of cash ow prediction models. They applied the cash ow prediction model used by Barth, Cram, and Nelson (2001) to two kinds of accounting
environments, one in which countries are market-oriented with legislation based on common-law and the other with countries that are bank-oriented with legislation based on code-law. The results suggested that the cash ow prediction model
performed consistently across countries, except for Germany, a bank-oriented country. They found that the effects of the
explanatory variables were similar in countries with high quality of accruals and different in countries with low quality of
accruals.
HassabElnaby and Mosebach (2005) examined whether a developing country used more accounting-based debt
covenants to control agency costs as it progressed towards becoming a market-based economy. The study analyzed 140
Egyptian debt agreements over three periods. The results showed that there was a signicant increase in the use of
accounting-based debt covenants during each successive period of development, indicating that the culture accepted this
method of controlling the problems that develop with the separation of ownership and management. The authors concluded
that the national cultural dimensions changed signicantly during the three periods of economic development.
In a study of an emerging economy, Mirshekary and Saudagaran (2005) presented evidence about the perceptions and
characteristics of seven different nancial statement user-groups in Iran. The survey results showed that a majority of the
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respondents, who included bank loan ofcers, stock brokers, auditors, tax ofcers, and bank investment ofcers as well as
institutional investors and academics, used annual reports and rated them as the most important source of information.
The income statement, auditors report, and the balance sheet were identied as the three most important sections of the
annual reports. The authors believed that the results of the survey would help accounting standard setters understand the
concerns of nancial statement users in developing countries.
Anandarajan, Hasan, and Lozano-Vivas (2005) investigated the efciency of loan loss decisions of bank managers in
Spain and the factors that were related to inefcient decisions. Using a stochastic frontier model, the study determined
that inefciency in loan loss provisions increased after deregulation of the banking industry occurred in Spain. Commercial
banks listed in the market had greater loan loss inefciency than mutually owned savings banks. Inefciency was found
to decrease with size while higher capitalization was related to more efcient loan loss provisions. The authors noted the
results had important implications for regulators concerned about misstatement of bank income and overstatement of
capital.
McEnroe and Sullivan (2006) conducted a survey of U.S. individual investors to determine their attitudes concerning the
accounting requirements for foreign listings on U.S. exchanges and their perceptions of the promulgation of international
accounting standards. The results showed that an overwhelming majority of respondents believed that foreign rms should
either use U.S. GAAP or reconcile their nancial statements to U.S. GAAP as a condition of listing on a U.S. market and should
be required to comply with the Sarbanes-Oxley Act to be listed. A very large majority of the respondents agreed that the
U.S. should control the accounting standards required for listing on U.S. markets while a majority believed that there should
be one global set of accounting principles for all companies on all exchanges. Over half the respondents indicated that an
international body with U.S. representation should develop the accounting standards.
3.2. Taxation
3.2.1. Tax rates
Buijink, Janssen, and Schols (2002) used information from nancial statements to estimate the average effective tax
rates (ETR) for companies domiciled in European Union (EU) member states during the seven-year period 19901996. The
goal was to compare the effective tax rates with the corporate statutory taxes rate in the companies country of domicile
to determine the magnitude of tax incentives provided by countries in the EU. They found that the use of tax incentives,
beyond differences in statutory tax rates, differed substantially between EU member states and that the provision of the tax
incentives did not equalize corporate effective tax rates between EU member states.
Derashid and Zhang (2003) examined the association between effective tax rates and a number of factors, including rm
size and industrial sector, for Malaysian rms in the period 19901999. They compared their results for a large, developing
country with the results from prior studies of U.S. effective tax rates. The study found that the association between ETR and
leverage, inventory intensity, and capital intensity of Malaysian companies was consistent with the results of prior studies
of U.S. rms. The results indicated, however, that unlike prior U.S. studies, industry sector was associated with the effective
tax rates paid by rms in Malaysia. They found no evidence that large Malaysian rms paid higher effective tax rates than
small rms, due in part to the industrial policies adopted by Malaysia. The study also determined that after adjusting for size
and sector effects, efcient rms, those with high return on assets, had signicantly lower effective tax rates while growth
rms had signicantly higher effective tax rates. The authors concluded that the results from Malaysia were consistent with
the industrial policy hypothesis of effective tax rates rather than the political cost hypothesis.
Simmons (2006) presented evidence concerning the existence of international corporate tax competition. The analysis
of trends in corporate tax rates showed declining and converging statutory and effective corporate tax rates. Analysis of tax
revenue data, however, provided little evidence that tax competition exists.
Haverals (2007) investigated the impact of the adoption of International Financial Reporting Standards on the effective
tax rates of companies in Belgium. The results showed that the use of the international accounting standards as the base for
tax purposes increased the tax burdens of companies in Belgium. The author concluded that companies in European Union
countries would also experience increases in the effective corporate tax rates if a common tax base was adopted using the
International Financial Reporting Standards. The author noted, however, that concerns about tax competition would not be
reduced unless there also was a convergence of corporate income tax rates.
Chen and Hung (2010) used a sample of Chinese listed companies to investigate the determinants of implicit taxes in
an emerging economy. The study found a negative association between tax subsidies and pre-tax return on equity. It also
found that the negative relationship was moderated by economic growth and capital investment growth rates. The results
indicated that ownership structure, state versus private, moderated the effect of growth on the realization of implicit taxes.
3.2.2. Tax compliance
Riahi-Belkaoui (2004) evaluated the relationship between tax compliance and tax morale in 30 countries. The study
focused on the relationship between determinants of tax morale, such as the level of economic freedom, competition laws,
and equity markets, and their impact on tax compliance. The results indicated that tax compliance was highest in countries
with high economic freedom, an important equity market, effective competition laws, and low serious crime rates. The
author concluded that the institutional and moral climates of a country affect tax compliance and should be considered by
tax authorities internationally.
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Richardson (2006) looked at data for 45 countries to determine which non-economic factors were the most important determinants of tax evasion. The results of the regression models showed that the level of tax complexity was the
most important determinant. Education, income source, and perceptions of fairness were signicant variables associated with tax evasion. The author noted that governments should use the results to design strategies to minimize tax
evasion.
Tsakumis, Curatola, and Porcano (2007) examined the levels of tax compliance in 50 countries to determine the inuence
of national culture on compliance. The study looked at the relationship of four cultural dimensions suggested by Hofstede
(1980) to the level of tax evasion. The results showed that the dimensions of higher uncertainty avoidance and power
distance were associated with higher tax evasion levels while higher individualism and higher masculinity were associated
with lower tax evasion across countries. The authors suggested that policy makers consider the cultural values of their
countries when devising tax compliance regulation.
Richardson (2008) extended the work of Tsakumis et al. (2007) by including legal, political, and religious variables in
the examination of the relationship between national cultural dimensions and tax evasion in 47 countries. The results
indicated that higher levels of tax evasion were associated with higher levels of uncertainty avoidance and lower levels
of individualism, legal enforcement, trust in government, and religiosity. The author suggested that the results will help
governments devise policies to reduce tax evasion if they consider legal, political, religious as well as cultural perspectives
in evaluating the likelihood of tax evasion.
Borkowski (2008) used a survey of transnational corporations tax directors to examine the inuence of the Pacic
Association of Tax Administrators (PATA) on tax authorities in Australia, Canada, Japan, and the U.S. and the effect on
transnational corporations tax evasion activities. The results showed that the activities of PATA enhanced consistency in
the countries approaches toward transfer-pricing documentation. The evidence also indicated that PATA had little effect on
the transfer-pricing activities of transnational corporations.
Wunder (2009) presented evidence concerning the current state of tax risk management by multinational companies. A
survey of the chief nancial ofcers of non-U.S. multinational and U.S. multinational rms revealed that large multinationals
have developed policies to manage general risk as well as tax risk. The U.S. and foreign multinationals had similar assessments
of the tax risks. Both types of companies reported that transnational risk was the most signicant risk while transfer pricing
presented the most serious tax provision risk.
Borkowski (2010) surveyed tax executives in four countries to determine whether or not transfer-pricing audits increased
as a result of PATA transfer-pricing guides. The evidence disclosed that demographic factors and tax audit risk were related.
Audit risk was signicantly associated with a multinational corporations audit history, country of domicile, transfer-pricing
methods, and industry. The study also revealed a signicant relationship between behavioral factors, such as preferences
for arbitration, and tax audit risk. The results showed that negotiation of an advance pricing agreement did not reduce the
risk of a tax audit.
3.2.3. Other
Simmons (2003) analyzed the relationship between countries corporate tax regimes and the level of foreign direct
investment owing into the countries. He sent a questionnaire to a sample of tax professionals from seven countries that
had a wide variety of corporate tax systems and asked the respondents to evaluate the attractiveness of the countries
corporate tax system attributes. He also asked them to indicate the level of attractiveness to potential overseas investors.
The results of the survey were used to create an index of corporate tax system attributes that ranged from those that were
not at all attractive to those that were extremely attractive. The relationship between the indices and measures of the
foreign direct investment inows was then tested. The study revealed a statistically signicant positive correlation between
overall corporate tax attractiveness and foreign direct investment. The results provided additional support that host country
corporate tax systems inuence the level of foreign direct investment inows.
Martin, Novack, and Pereira (2009) used portfolio analysis to test whether U.S. multinational rms with large foreign
investments experienced signicantly positive returns following enactment of a tax law that reduced the cost of repatriating
earnings. The results showed that rms with unrepatriated foreign earnings experienced signicantly positive returns around
the enactment date indicating that the legislation was good news for multinational rms.
3.3. Auditing
3.3.1. Analytical procedures
Lin and Frazer (2003) sent surveys to external auditors from 52 Canadian accounting rms to determine the extent of use
of analytical procedures versus traditional audit approaches based on substantive testing. They determined that analytical
procedures were used in practice by Canadian rms of all sizes and extensively by larger rms. Their results were comparable
to prior studies of the use of analytical procedures by U.K. and U.S. auditing rms. The results also indicated that regardless
of rm size, analytical procedures were used extensively during the nal review stage of the audit. The study determined,
however, that the efciency gains that auditors hoped to achieve through the use of analytical procedures rather than tests
of detail were achieved only partially at the time of the study.
Hughes, Sander, Higgs, and Cullinan (2009) conducted an experiment to determine the effect of culture on entry-level
auditors use of analytical procedures. Using accountancy students in Mexico and the U.S. as proxies for entry-level auditors,
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they analyzed whether differences in the cultural dimensions of power distance, uncertainty avoidance, and individualism
affected expectations of current year balances and assessment of risk of material misstatement. The results showed that the
ability to form expectations about account balances was not related to differences in culture. The study also found that for
both groups, the assessment of risk was not consistent with expectations but instead with the nature of changes in account
balances.
3.3.2. Audit committees
Chau and Leung (2006) studied the relationship between the existence of audit committees of publicly traded rms
in Hong Kong and the corporate governance attributes of family shareholding, non-executive directors, and independent
chairmen. The study found a positive association between the percentage of independent non-executive directors on a
board and the existence of an audit committee. The results indicated that the existence of an audit committee depended on
the level of family shareholding and that the positive association between independent directors and the existence of an
audit committee was stronger for rms with independent chairmen. The authors noted that the results would help stock
exchanges in their deliberations about independent chairmen and audit committees, especially in emerging markets where
there is a high level of family ownership in rms.
Jaggi and Leung (2007) analyzed whether or not the voluntary establishment of audit committees constrained earnings
management in Hong Kong rms. Using a three-stage regression model, they determined that the use of audit committees had
a signicant impact on limiting earnings management even when there was high family ownership. They found, however,
that when family members dominated corporate boards, the effectiveness of audit committees in monitoring earnings
management was signicantly reduced.
3.3.3. Audit expectations gap
Haniffa and Hudaib (2007) examined if perceptions of audit performance by users and auditors differed in Saudi Arabia.
They used surveys and interviews of auditors and nancial statement users to determine if institutional and cultural factors
inuenced perceptions of audits. The results showed that an audit expectation-performance gap existed in Saudi Arabia.
Auditors believed that the gap was caused by the limited scope of audits and decient standards while users believed the
cause was substandard performance by auditors. Evidence was presented that societal values and factors in the business
environment that were beyond the control of the auditing profession hindered the effective performance of the audit.
Hassink, Bollen, Meuwissen, and Vries (2009) analyzed the nature of the audit expectations gap in corporate fraud
cases using a survey of Dutch bankers, business managers, and auditors. The study determined that a substantial audit
expectations gap existed concerning the auditors responsibilities and performance as stipulated in the standards. Business
managers were less likely than bankers to view auditors performance as substandard and identied fewer areas in which
auditing standards need to be revised. The results also showed that business managers and bankers had higher expectations
of the duty of auditors than auditors considered their duties to be and had unreasonable expectations concerning auditor
responsibilities to detect non-material fraud or fraud from collusion.
3.3.4. Auditor choice and auditor fees
Lin and Liu (2009) examined the effect of corporate governance on auditor choice in China. Using logit regression, they
analyzed the association between the choice of auditors made by Chinese companies with initial public offerings and ownership concentration, size of the supervisory board, and duality of the roles of chairman and CEO. The results showed that
Chinese rms with weaker corporate governance mechanisms exhibited by higher ownership concentration, smaller supervisory boards, and duality of roles were less likely to hire high quality auditors. The authors recommended improvements
in the corporate governance of listed rms in China to promote condence in the Chinese listed market.
Wang and Iqbal (2009) analyzed the audit market in China to determine the variables affecting audit fees paid by publicly
traded companies that issued both foreign and domestic shares. The results indicated that brand name and industry specialization were associated with higher prices paid to Big 4 international accounting rms for both statutory and supplementary
audits. The results also showed that second-tier international accounting rms with specialized industry knowledge did not
earn higher fees. The authors noted that their results could help rms price their services in China.
Behn, Lee, and Jin (2009) studied whether or not increased competition in the Korean audit market led to audit fee
discounting. Using disclosed audit fee data for Korean companies for the period 19992004, they determined that although
audit fees per hour decreased, total audit fees increased. They also found that the fees charged by the big international
accounting rms were lower per hour than other auditing rms and decreased over time. Discounting to obtain initial audit
engagements was also uncovered in the Korean audit market. The authors recommended that Korean regulators take steps
to ensure that high quality audits are maintained in this price competitive market.
Ho and Hutchinson (2010) used a questionnaire and a review of annual reports to determine whether or not there is
a relationship between annual audit fees and the existence of internal audit departments. The results showed that lower
audit fees are associated with larger internal audit departments. They also determined that lower audit fees are associated
with certain internal audit department functions such as fraud investigations, systems development and maintenance, and
internal control reviews. The authors noted that the results extend the literature on the relationship between external audits
and internal audits to a business environment characterized by concentrated ownership and majority/minority shareholder
conict.
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3.3.5. Other
Lin, Tang, and Xiao (2003) conducted an experiment to determine if the issuance of a qualied auditor opinion affected
users understanding and use of nancial statements in China. Their results indicated that Chinese credit and loan ofcers perceived a qualied auditor opinion to have a negative impact on the credibility of nancial statements. No signicant
differences were found in users investment or credit decisions with respect to nancial statements with qualied or unqualied audit opinions. The study determined that U.S.-style qualied audit reports had limited information content to users
in China. The authors suggested that there was a need to improve Chinese auditing standards.
Chung, Farrar, Puri, and Thorne (2010) evaluated the status, after enactment of the Sarbanes-Oxley Act, of auditors legal
liability to third parties in seven countries. The results indicated that the legal regimes in the countries studied were related
to the changes made to auditor liability in those countries. Two civil law countries, Germany and France, made no changes to
increase auditor liability to third parties while the ve common law countries in the study enacted comprehensive legislation
to increase auditors liability to third parties.
3.4. Managerial accounting
Helliar, Lonie, Power, and Sinclair (2002) conducted a comprehensive survey of accountants and managers in a large
number of U.K. businesses to determine their attitudes toward risk. They found that although accountants views of risk were
similar to those of business managers, their attitudes toward and attempts to control risk depended on both quantitative
and qualitative factors. The results indicated that loss-aversion was often the most important concern to both groups. They
recommended that companies appoint a senior executive to develop an overall assessment of risk for the rm, put in place
formal risk management procedures, and create lines of communication between companies and stakeholder groups so that
risk information can be disseminated.
Collins, Holzmann, and Mendoza (2005) conducted a study of U.S. management accountants and Latin American business
people to determine if cultural origin predicted macho stereotypes and whether these stereotypes affected attitudes towards
the budgeting process. Using the results of a questionnaire and a LISREL structural equation technique, they found differences
in the macho attitudes of the two groups. The Latin American group displayed chauvinistic or classic macho tendencies
while the U.S. group showed aggressive macho tendencies. The results also indicated that the chauvinistic macho group
followed budgetary procedures, although in a risky manner. The classic macho group accepted personal responsibility for
budgetary results and worked harder to achieve them, behavior that was consistent with the classic macho traits of honor
and self-reliance. The aggressive macho group was positively associated with budgetary risk-seeking that may or may not
have benetted the company. The authors noted that understanding the cultural effects on attitudes towards budgeting is
important as more trade is conducted between the U.S. and Latin America.
Douglas, HassabElnaby, Norman, and Wier (2007) investigated the budgetary behaviors of Egyptian managers who
worked for U.S. rms in Egypt and Egyptian managers who worked for Egyptian rms to determine the effect of national
culture and ethical position on budgetary systems. The results of the survey of 300 managers showed that the national culture of the home country of a rm appeared to inuence budgetary design variables and the ethical positions of managers
in their foreign operations. The study found that Egyptian managers of U.S. rms had higher levels of participation in setting
budgets and more incentives to create slack in budgets than their Egyptian counterparts. The results showed that Egyptian
managers of U.S. rms in Egypt were also less idealistic than the Egyptian managers of Egyptian companies. The authors
suggested that the results could help multinational rms operating in other foreign countries create effective systems of
multinational organizational controls.
Huang and Chen (2009) investigated the relationship between budgetary attitudes in Taiwan, leadership behavior, and
managerial budgeting games. The survey of over 200 Taiwanese accounting and nance managers showed that positive
feedback from supervisors had a direct positive effect on managers budgetary attitudes while negative feedback had no
effect on the attitudes. The results also indicated that the use of non-straight forward tactics to obtain higher budgets had a
negative effect on attitudes toward the budget process while the use of straight forward or economic tactics combined with
positive feedback resulted in better attitudes toward the budgeting process. The authors noted that the ndings would help
multinational corporations operating in Taiwan adopt effective leadership behavior in preparing budgets.
3.5. Accounting information systems (AIS)
Adhikari, Lebow, and Zhang (2004) surveyed multinational U.S. companies to determine the relationships among rm
characteristics, such as size and degree of internationalization, international features of accounting software, such as multireporting, multi-lingual, and multi-currency functionality, and general selection criteria, such as cost and exibility. The
results indicated that the size and degree of internationalization of business affected preferences for international software
features while rm characteristics did not have a signicant effect on the general selection criteria.
3.6. Special studies
In a special study, Adhikari et al. (2002) analyzed the international accounting research in the Journal of International
Accounting, Auditing and Taxation for the period 19922001. Their results indicated that the research published in the
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journal spanned a broad array of topics, used several methodologies, and included studies conducted by co-authors in
and outside the U.S. They concluded that the journal was an important forum to promote and disseminate international
accounting research.
In a special study, Street and Gray (2002) summarized the results of a research monograph sponsored by the Association
of Chartered Certied Accountants (ACCA). The research examined the 1998 nancial statements and footnotes of a sample of
companies worldwide to assess the extent of compliance with International Accounting Standards and determine the factors
associated with compliance. The authors noted that there was a signicant level of non-compliance in 1998, especially in
the area of IAS disclosures, and identied the key factors associated with the levels of compliance.
In a set of special studies, Street (2002, 2006) discussed the steps taken toward global convergence of accounting standards. The 2002 study provided an overview of GAAP 2001, a survey by the worlds seven largest accounting rms that
analyzed the progress made toward convergence of national accounting standards with international accounting standards.
The study looked at 62 countries and determined that only one-third had taken steps toward convergence while half of the
countries had not implemented or proposed standards to reduce signicant differences between national and international
accounting standards.
The 2006 study reported on the relationship over time between representatives of the national accounting standard
setters in the U.S., U.K., Canada, Australia, and New Zealand (G4) and the International Accounting Standards Committee (IASC) and the signicance of the partnership between the G4 and the International Accounting Standards Board. The
author stressed that the relationship between the national accounting standard setters and the IASB must be maintained if
convergence to high-quality global accounting standards is to be attained.
A special study by Fasshauer, Glaum, and Street (2008) provided a summary of ACCA research that analyzed the dened
benet pension plan disclosures made by companies on 20 European exchanges. The study provided evidence of a lack of
comparability on the balance sheet from allowing choices in how to recognize actuarial gains and losses on dened benet
plans.
4. Conclusion
This article analyzes and reviews the international accounting research published in the Journal of International Accounting,
Auditing and Taxation during the period 20022010. The 82 articles and six special studies published investigated new ideas
and extended prior research that took on new importance as the profession changed over time.
Papers dealing with nancial accounting and reporting comprised the majority of publications during the 20022010
period. Research on the value relevance of various standards or practices was the predominant focus of these articles. Studies
dealing with the progress and problems of convergence increased in frequency as more countries adopted or announced
plans to adopt IFRS. Although much of the research highlighted accounting issues in Europe, Australia, and North America,
studies focusing on China and emerging economies were published with increasing frequency as these countries became
more signicant players in the world economy.
Research in the areas of taxation and auditing made up a sizable percentage of the publications throughout 20022010.
Comparisons of effective tax rates and policies to increase tax compliance were the focus of a large percentage of the tax
research and continue to provide opportunities for future research. Articles dealing with international managerial accounting
practices appeared relatively infrequently. As rms continue to expand their multinational operations in other regions of
the world, research dealing with how differences in culture and legal/regulatory environments affect managerial practices
will remain important to accounting practitioners and academics.
The publication of single country studies increased in frequency in the period 20022010 as more countries adopted IFRS.
As further progress toward the goal of convergence is realized, the frequency of single country studies should decrease with
greater emphasis being placed on multi-country perspectives of accounting issues. As the American Institute of Certied
Public Accountants (AICPA) noted in the background report of IFRS provided on the website www.IFRS.com, the adoption
of IFRS will affect accountants and companies in ways far beyond the impact on nancial statements. Adoption of IFRS
will require changes to rms information systems, tax reporting systems, and employee training programs, among other
functions. These changes will provide new avenues for international accounting research.
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