IFRS Adoption and Auditing - A Review

Asian Review of Accounting
IFRS adoption and auditing: a review

Hichem Khlif Imen Achek
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ARA
24,3
IFRS adoption and auditing:
a review
Hichem Khlif
338 Faculty of Economics and Management of Mahdia,
University of Monastir, Kerkennah, Tunisia, and
Received 6 December 2014 Imen Achek
Revised 29 March 2015 High School of Commerce of Tunis, University of Manouba,
24 June 2015
Accepted 31 August 2015 Kerkennah, Tunisia
Abstract
Purpose The purpose of this paper is to review the empirical research literature dealing with
International Financial Reporting Standards (IFRS) and auditing. The authors identify four main
topics related to the effect of IFRS adoption on audit fees, audit market and audit report lag and the
influence of auditor choice on IFRS compliance.
Design/methodology/approach For each reviewed stream of research, the authors present its
theoretical underpinning and summarize its main results.
Findings Based on 26 empirical studies, the review reveals four main findings. First, IFRS adoption
is associated with increased audit fees. Second, IFRS adoption has had an effect on audit market
through auditor choice, audit switching and audit market concentration. Third, IFRS adoption has
increased audit report lag. Finally, the authors document that audit quality, as proxied by auditor type,
may play an important role in enforcing the compliance with IFRS.
Practical implications For regulators the review highlights that IFRS adoption is associated with
several effects dealing with audit cost (audit fees), audit efficiency (audit report lag) and may benefit
audit firms with international affiliation compared to local ones and this may inform regulators in
settings that plan to adopt IFRS in the future.
Originality/value This literature review represents a historical record and an introduction for
researchers who aim to investigate this topic in the future since the authors provide specific guidance
for future research avenues for these reviewed strands of research and other unexplored topics related
to auditing and IFRS.
Keywords Audit report lag, Audit fees, Audit quality, Audit market, IFRS adoption
Paper type Research paper
1. Introduction
The adoption of International Financial Reporting Standards (IFRS) worldwide has
stimulated empirical research that focusses on whether the quality of financial
reporting improves subsequent to IFRS adoption through increased value relevance
(e.g. Clarkson et al., 2011; Hung and Subramanyam, 2007), lower discretionary
accruals (e.g. Chen et al., 2010; Houqe et al., 2012b) and higher analysts forecast
accuracy (e.g. Chalmers et al., 2012; Kim and Shi, 2012). This strand of empirical
research has provided mixed empirical evidence (Ahmed et al., 2013). In addition to the
studies dealing with the effect of IFRS adoption on financial reporting quality, another
stream of research examines the economic consequences of IFRS adoption including
the effect of IFRS adoption on the cost of equity capital (e.g. Daske, 2006), foreign direct
Asian Review of Accounting
investment (e.g. Gordon et al., 2012) and market liquidity (e.g. Drake et al., 2010).
Vol. 24 No. 3, 2016
pp. 338-361
Emerald Group Publishing Limited
1321-7348
The authors gratefully acknowledge the helpful comments and suggestions from the two
DOI 10.1108/ARA-12-2014-0126 anonymous reviewers and the Editor-in-Chief; Haiyan Zhou, of Asian Review of Accounting.
Kim et al. (2012, p. 2062) state that These studies yield mixed evidence on whether IFRS adoption
market participants perceive an overall net benefit from IFRS adoption. and auditing
These empirical investigations shed light more on market participants
(e.g. investors, managers and financial analysts) and neglect the firms auditor who
has the duty to assess financial statements credibility under IFRS. Furthermore, these
studies appear to overweight the economic benefits of IFRS adoption without taking
into account how this adoption may affect audit fees, audit delays and auditor choice. 339
Several empirical reviews (e.g. Soderstrom and Sun, 2007; Pope and McLeay, 2011;
Brggemann et al., 2013; Mohammadrezaei et al., 2015; Palea, 2013) have been
undertaken to summarize the empirical literature dealing with IFRS adoption and
accounting quality. However, no literature review has been conducted to summarize
specifically the effects of IFRS adoption on auditing.
Soderstrom and Sun (2007) focus on voluntary IFRS adoption and market reaction
to the announcements of IFRS adoption in the European Union, while Pope and
McLeay (2011) concentrate on the mandatory adoption of IFRS for a limited period
from 2007 to 2010. Brggemann et al. (2013) review a wide range of mandatory IFRS
adoption effects including accounting choices in implementing IFRS, capital markets
and macroeconomic consequences. Mohammadrezaei et al. (2015) and Palea (2013)
review the recent value relevance studies dealing with mandatory IFRS adoption.
Taken together, these reviews concentrate on the benefit side of IFRS adoption with
respect to investors and managers. Therefore, it becomes important to review the effect
of IFRS adoption on audit practices and the role of auditors on enforcing compliance
with IFRS to provide policy makers with a more informative picture about the overall
economic consequences of IFRS adoption.
At the time of writing, the empirical literature examining the association between
IFRS adoption and auditing focusses specifically on four strands of research including
the effect of IFRS adoption on audit fees, audit report lag and auditor choice and the
association between auditor type and IFRS compliance. However, evidence on these
topics is still limited. For instance, Cameran and Perotti (2014) suggest that only few
academic works have examined the change in audit fees after IFRS adoption. Similarly,
we identify only few studies dealing with IFRS adoption and audit market (e.g. Houqe
et al., 2012a; Dinh and Piot, 2014; Wieczynska, 2016) and IFRS adoption and audit
report lag (e.g. Habib and Bhuiyan, 2011; Walker and Hay, 2013). Finally, we identify
several studies specifically dealing with auditor choice and IFRS compliance
(e.g. Hodgdon et al., 2009; Ebrahim, 2014) and other empirical works that examine, in
general the determinants of IFRS compliance, but include auditor type as a control or
test variable (e.g. Glaum et al., 2013).
Therefore, the aim of this study is to present the theoretical underpinnings for the
effect of IFRS adoption on audit fees, auditor choice, audit report lag and the influence
of auditor type on IFRS compliance, review and summarize these streams of research
and provide suggestions for future research. Reviewing these streams of empirical
research is important to inform researchers and policy makers about the effect of IFRS
adoption on audit cost, audit efficiency, audit market and the role played by auditor, as
an external governance mechanism, in enforcing IFRS.
We adopt a historical approach and focus on accounting literature published in
accounting and auditing journals and available working papers since 2005. This year
marks the widespread IFRS adoption by countries in the European community and
most Asia-Pacific countries which leads to an intense debate in accounting literature
over the costs and benefits of such adoption (Taylor, 2009).
ARA In order to identify relevant studies for this literature review, we have selected the
24,3 following keywords: IFRS adoption, audit fees, audit market, auditor choice, audit
report lag and compliance with IFRS. These key terms were used in editorial databases,
such as American Accounting Association, Elsevier, Emerald, JSTOR, Springer, Taylor
and Francis, Wiley and the Social Science Research Network (SSRN). These searches
yield a total number of 26 empirical studies dealing with IFRS and auditing.
340 This literature review reveals that audit fees and audit report lag have increased
after the adoption of IFRS, such an adoption has enlarged the domination of the global
audit firms and more specifically Big 4 audit firms and the presence of Big 4 auditors
is associated with higher compliance level with IFRS. These preliminary evidences in
accounting and auditing literature suggest that these topics are still in their infancy
and that more researches are needed to capture the effect of IFRS adoption on audit
practices and audit market dynamics, audit fees, audit report lag and whether higher
audit quality increases the degree of compliance with IFRS.
Conducting a review on the effect IFRS adoption effects on auditing environment is
of critical importance for researchers, regulators, auditors and firms management.
For researchers, this paper complements these reviews that focus on market
participants of IFRS adoption effects by shedding light on auditing field. Our review
suggests that the effects of IFRS adoption on audit fees and audit market are fertile
ground for future empirical investigations and authors should try to refine their
analysis at country and international level to inform regulators about the real effect of
IFRS adoption on audit practices.
For regulators, our review is of timely importance given the renewed debate about
IFRS adoption costs and its effects on audit market. It highlights that the costs of
transition to IFRS may exceed its benefits if there is no adequate legal and
institutional environment and emphasizes the role of external auditor in the
enforcement of IFRS. In addition, regulators that are currently planning to adopt
IFRS should take into account the costs associated with this adoption (e.g. audit fees)
and how to reduce the stress on small companies by simply adopting IFRS for small
and medium firms.
For the professional accountancy bodies in countries planning to adopt IFRS, this
review highlights that IFRS adoption may affect audit market competition since local
audit firms will have a lack of knowledge of IFRS compared to Big 4 audit firms. This
review also highlights that IFRS adoption may affect audit efficiency through more
time required to conduct audit. Accordingly, these professional accountancy bodies
may impose to local audit firms to strengthen the professional education and training
of their staffs in line with the requirements of The International Federation of
Accountants guidelines. This may reduce the adverse effect of IFRS adoption on audit
market competition and timely disclosure. At the same time, auditors play an important
role in enforcing IFRS. Accordingly, they need to be aware about the risk of material
misstatement in the financial statements prepared under IFRS and signal any
irregularities to financial statements users through adverse opinion.
Finally, with respect to companies, our review reveals that at least IFRS adoption
may influence the rapid communication of financial statements and cause an increase
in audit fees. Therefore, firms management should be aware about these IFRS
adoption consequences to reduce their adverse effects on timely disclosure and
corporate profitability.
The reminder of this paper is organized as follows. Section 2 presents the theoretical
underpinnings. Sections 3-6 review and summarize the empirical literature dealing with
IFRS and audit fees, IFRS and audit market, IFRS and audit report lag and the IFRS adoption
association between auditor type and IFRS compliance, respectively. Section 7 provides and auditing
directions for future research. Finally, Section 8 concludes the paper.
2. Theoretical underpinnings
In this section, we try to explain briefly why audit fees, audit report lag and audit
market may be affected by the transition to IFRS and how auditor type may influence 341
the degree of compliance with IFRS[1].
2.1 IFRS adoption and audit fees

From a theoretical perspective, it has been argued in auditing literature that the
adoption of IFRS increases auditor effort (Cameran and Perotti, 2014). Kim et al. (2012)
develop a theoretical model for an auditor who has an objective to choose an audit
effort that minimizes the total audit costs. In their model, total audit costs are the sum
of the expected legal liabilities and auditors effort costs. The first component of total
audit costs is linked to the risk that an auditor fails to discover and report a material
misstatement in a companys financial statements and the risk that he/she will be held
accountable in court following this audit failure especially in a setting characterized by
a strong legal enforcement. Under the assumption that audit market is competitive,
audit fees will equal to the total audit costs in the equilibrium. After determining the
minimum audit effort (e*) and replacing it in the audit fees function in the equilibrium,
Kim et al. (2012) demonstrate analytically that audit fees are an increasing function of
audit complexity which normally increases under IFRS.
From a practical perspective, auditors are likely to increase audit effort to reduce the
risks associated with the auditing of financial statements established in accordance
with IFRS. For instance, the guidance issued by the Audit and Assurance Faculty of
the Institute of Chartered Accountants in England and Wales (2004, p. 1) in July posits
that The conversion to IFRS will be complex and detailed for many companies and
recent research and surveys on the state of preparedness for this important change are
not encouraging. The combination of this complexity and the apparent lack of
preparation results in an increase in risk for auditors as they prepare to audit financial
statements prepared under IFRS.
A primary source of risk comes from IFRS emphasis on fair value which is required
by several IFRS standards including IAS 16 Property, Plant and Equipment, IAS
40 Investment Property, IFRS 5 No-Current Assets Held for Sale and Discontinued
Operations, IFRS 8 Operating Segments, IAS 36 Impairment of Assets, IAS
37 Provisions, Contingent Liabilities and Contingent Assets, IAS 38 Intangible
Assets, and IAS 39 Financial Instruments Recognition and Measurement (replaced by
IFRS 9 Financial Instruments) (Ahmed et al., 2013). Other complexities in IFRS come
from the impairment test stipulated by IAS 36. To perform such test, firms need to
value their operational business units using heavy processes on the basis of forward-
looking information (business plans, etc.) (Glaum et al., 2013). Similarly, Beattie et al.
(2007) suggest that IFRS for business combinations and the impairment testing of
goodwill are controversial and challenging for financial statements preparers. For
instance, IFRS 3 requires firms to recognize and measure at fair value all assets
acquired and liabilities assumed, including intangible assets and contingent liabilities
not previously recorded by the acquirees (Glaum et al., 2013).
Overall, there is a prevailing view among professionals that the principles-based
IFRS standards will exacerbate litigation costs, while depriving auditors of their ability
ARA to demonstrate compliance with specific guidelines and established rules in defense
24,3 of an audit failure (Diehl, 2010). Furthermore, hedge accounting and the valuation of
financial derivates increase also audit complexity and require an additional effort from
the auditor (Cameran and Perotti, 2014). Therefore, under IFRS the increased risks for
auditor come from the probability of the financial statements being materially
misstated, and the litigation risk (i.e. the probability of incurring liability payments or
342 loss of reputation capital) associated with the consequences of materially misstated
financial statements that auditor fails to discover (Kim et al., 2012).
Based on the above predictions, researchers (e.g. Kim et al., 2012; Cameran and
Perotti, 2014) suggest that auditor will require an audit fee premium to compensate for
increased audit risk and complexity associated with financial statements established
under IFRS.
2.2 IFRS and auditor choice

As indicated above, IFRS are characterized by higher complexity which may
strengthen the position of global audit firms and increase the barriers to entry to
the global market for smaller audit companies (Dinh and Piot, 2014). Therefore, the
adoption of IFRS may represent a competitive advantage for Big 4 auditors since they
possess more IFRS-related expertise to deal with greater standards complexity
implying intellectual barriers to entry for local audit firms (Wieczynska, 2016).
In addition, Big 4 auditors are more concerned with their brand name reputation
protection, which motivates them to perform better audit procedures when conducting
their audit missions (DeAngelo, 1981). In the same vein, Dye (1993) indicates that Big 4
auditors provide higher audit quality in order to protect their large wealth (i.e. deep
pockets) from the lawsuits and litigation risk. Since the transition to IFRS represents a
complex operation and given the fact that generally countries impose the full IFRS
adoption to listed companies[2], Big 4 auditors will be more able to ensure the safe
transition to IFRS in such a litigious environment and enhance their reputation as a
high-quality provider of auditing and insurance services.
However, the increased demand for Big 4 auditors services following IFRS adoption
may cause bounded production capacities for these auditors and they will not be able to
respond adequately to all audit demands which implies the loss of some clients (Dinh
and Piot, 2014). Accordingly, Big 4 auditors will accept more interesting clients and lose
other clients that are unable to afford additional audit fees. This implies that IFRS
adoption will not have a great impact on audit market and auditor choice. In the same
vein, DeAngelo (1981) adds that the auditor-client relationship can be viewed as a
bilateral monopoly implying that the management decision to switch to another auditor
will be costful for both parties. Therefore, even if there is a major accounting regulation
(e.g. IFRS) the audit-client relationship will remain status quo (Dinh and Piot, 2014).
Overall, it seems that the theoretical predictions for the effect of IFRS adoption on
audit market dynamics are mixed. For instance, the switch to IFRS may benefit, from
the one side, Big 4 auditors through intellectual barriers to entry for small audit firms
but, from the other side, increase the bounded production capacities to respond
adequately to all audit demand.
2.3 IFRS adoption and audit report lag

Audit report lag represents one of the few external audit output variables available to
evaluate audit efficiency (Habib, 2015). It is generally defined as the period between
a companys fiscal year end and the audit report date. This definition of audit report IFRS adoption
lag implies that both management, when preparing financial statements, and and auditing
auditors, when controlling them, play a critical role in shaping this delay (Khlif and
Samaha, 2014).
From management perspective, the transition to IFRS generates modification in the
traditional models of financial reporting used by firms and requires a process of
adaptation by management in terms of the presentation of financial information and to 343
the application of the new accounting standards (Bonson-Ponte et al., 2008). This
implies that the adoption of IFRS may increase management delays in submitting
financial statements to auditors.
From auditor perspective, Habib (2015) suggests that the adoption of IFRS is
associated with more audit risk. For instance, the International Accounting Standards
Board adopts a principles-based standard-setting approach which implies that auditors

have to deal with increased managerial judgments in terms of recognition rules (e.g.
intangible assets) and classification (e.g. financial instruments) when conducting their
audit mission. This leads to lengthy audit delays following IFRS adoption.
In sum, the adoption of IFRS may influence management delay when preparing
financial statements and auditors delays when auditing them which translate into
lengthy audit report lag.
2.4 Auditor type and compliance with IFRS

Auditor plays an important role in enforcing IFRS since he/she has the duty to assess
the credibility of financial statements prepared under IFRS. Previous studies
(e.g. DeAngelo, 1981; Douthett et al., 2001; Moizer, 1997) suggest that audit quality
depends on auditor size and higher quality audit firms are more likely to improve
financial reporting credibility due to greater knowledge and skills (Dunn and Mayhew,
2004). The rationale for the linkage between auditor type and IFRS compliance is three
fold. First, Big 4 auditors need to enhance their reputation capital by signaling their
independence through the application of stringent accounting standards such as IFRS.
Second, the deep pocket hypothesis suggests that Big 4 auditors are more able to
enforce IFRS compliance since they will be less sensitive to the loss of a firm if its
management is reluctant to increase financial reporting quality (Lennox, 1999). In other
words, these auditors will be more able to exert pressure on firms management to
enhance compliance with IFRS. Finally, large and international audit firms have more
competitive advantages and skills to control the application of IFRS given the superior
international training and competence of their employees (Dumontier and Raffournier,
1998). Based on all these theoretical arguments, the empirical literature dealing with the
effect of Big 4 auditors on IFRS compliance predicts a positive association between
auditor type and IFRS compliance.
3. IFRS adoption and audit fees

In this section, we try to review the empirical literature dealing with the effect of IFRS
adoption on audit fees. To the best of our knowledge, the Griffin et al.s (2009) study
represents the pioneering empirical work in this stream of research. This empirical
examination has been followed by several single-country works (e.g. Vieru and
Schadewitz, 2010; Lin and Yen, 2011; Yaacob and Che-Ahmad, 2012; De George et al.,
2013; Abu Risheh and Al-Saeed, 2014; Cameran and Perotti, 2014; Choi and Yoon, 2014;
Hassan et al., 2014) and cross-country empirical studies (e.g. Kim et al., 2012; Goncharov
et al., 2014). For single-country empirical works, we adopt a regional classification.
ARA 3.1 Single-country empirical works
24,3 As stated above, Griffin et al. (2009) represents the first rigorous empirical investigation
found within the recent literature. Based on sample of 653 company-year observations
from 2002 to 2006 in New Zealand, they document that audit fees has increased
significantly for the second and third year of IFRS adoption compared to the first and
pre-IFRS adoption periods. When they consider only companies audited by Big 4
344 auditors, the results remain stable for the pre-adoption period and the second and third
years of IFRS adoption, while they become more significant for the first adoption year.
Finally, they control for firm size by distinguishing between larger and smaller
companies based on their revenues. They confirm that audit fees have significantly
increased especially in the second and third years of IFRS adoption. In the same region,
De George et al. (2013) examine the effect of IFRS adoption on audit fees in the
Australian setting. Based on sample of sample of 907 listed Australian companies on

ASX from 2002 to 2006, they document, in general, that IFRS adoption has had a
significant positive effect on audit fees. As a refinement of these results, they examine
how the magnitude of the equity IFRS adjustment during the first year of IFRS
adoption may affect the strength of the above association. They show that this positive
and significant association is maintained when there are positive or negative equity
IFRS adjustments. Furthermore, the effect of IFRS adoption on audit fees is more
significant under higher equity IFRS adjustment.
In an European civil law country, namely, Finland, Vieru and Schadewitz (2010)
examine the effect of IFRS adoption on audit fees for a sample of 73 Finnish listed firms
from 2004 to 2005. To proxy for IFRS transition complexity, they quantify the magnitude
of IFRS adjustments based on an index of comparability between IFRS and local GAAP.
When considering all fees paid (audit and non-audit fees) to statutory auditors, they
document that this association is positive and significant for the period 2004-2005.
Testing this association for each year separately, they provide evidence that this
association is more significant for 2005 compared to 2004. When they focus only on audit
fees, the relationship between the magnitude of IFRS adjustments and audit fees becomes
insignificant for 2004 and 2005[3]. In another civil law country, namely, Italy, Cameran
and Perotti (2014) investigate the effect of IFRS adoption on audit fees for listed and non-
listed banks in Italy. Based on a sample of 136 banks from 1999 to 2006, they initially
examine the effect of the first and the second years of IFRS adoption on audit fees. Since
banking industry is characterized by derivates, they further examine the effect of
hedging and trading derivates on this association. Findings show that that audit fees
increase following IFRS adoption, in the first and the second years of IFRS transition.
Results also show that the presence of financial derivatives held for hedging purposes is
associated with increased audit fees. In the same vein, Hassan et al. (2014) investigate the
association between audit fees and IFRS adoption for a sample of listed UK companies
over the period 2003-2011. They further test for the effect of auditor type on this
association. Their results show that audit fees have significantly increased following
the adoption of IFRS. In addition, companies audited by non-Big 4 auditors witness
higher audit costs compared to their counterparts audited by Big 4 audit companies.
Finally, four studies have been conducted in the Asian setting, namely, China,
Malaysia, South Korea and Jordan. For instance, Lin and Yen (2011) investigate the
association between audit fees and the adoption of IFRS in China based on a sample of
2000 listed Chinese companies for the pre-IFRS adoption period (2004, 2005 and 2006)
and the post-adoption period (2009, 2010, 2011). They also examine how state
ownership and auditor size may affect audit fees. Findings show that audit fees have
significantly increased following IFRS adoption and this is particularly true for IFRS adoption
companies characterized by low-state ownership and those audited by Big 4 audit and auditing
firms. Yaacob and Che-Ahmad (2012) examine the same association in Malaysia for
over the period 2004-2008. They document a significant increase in the audit fees in the
post-IFRS adoption period. Choi and Yoon (2014) investigate the association between
audit fees and IFRS adoption in South Korea for a sample 3,293 firm-year observations
over the period 2006-2011. They also examine how auditor size may affect this 345
relationship. They document that audit fees have significantly increased following IFRS
adoption and this increase is more pronounced for companies audited by Big 4 audit firms.
Similarly, Abu Risheh and Al-Saeed (2014) examine the same topic in an emergent market,
namely, Jordan. The sample consists of 91 Jordanian industrial companies listed in the
Amman Stock Exchange during the period 1998-2011. Their results show that audit fees
have increased following the adoption of IFRS by listed Jordanian industrial firms.
Overall, it seems that single-country empirical works provide support for the
significant increase of audit fees following IFRS adoption in common law settings
(Australia and New Zealand, UK), civil law European and Asian countries. More
importantly, these studies show that this association may be moderated by ownership
structure (e.g. state ownership), the magnitude of equity adjustments during the first
adoption and the presence of specific accounting complexity related, for example to hedge
accounting for derivates. However, the major weakness of single-country studies is that
they do not give the opportunity for researchers to test for the effect of legal enforcement
and institutional characteristics on the relationship between audit fees and IFRS adoption.
3.2 Cross-country empirical studies

We identify three empirical studies dealing with IFRS adoption and audit fees at the
international level and more specifically in the European Community. Kim et al. (2012)
consider a sample of firm-year observations from European countries and other
countries belonging to the Organization for Economic Co-operation and Development
(OECD) such as USA, Japan and Canada over the period 2004-2008. The treatment sample
includes European countries, while control sample encompasses other OECD countries
from outside Europe. In order to control for the effect of first year adoption, they consider
two samples; the first excludes 2005 year, while the second includes it. Results show that
audit fees witness a significant increase after the adoption of IFRS, regardless the inclusion
or the exclusion of 2005 fiscal year, and this particularly true for the treatment sample
including European countries. They further test how audit complexity[4], reporting quality
[5] and legal regime[6] may affect the association between audit fees and IFRS adoption.
They provide evidence that IFRS-related audit fee premium increases with the magnitude
audit complexity under IFRS adoption and decreases with the improvement in financial
reporting quality arising from IFRS adoption. Finally, they document that IFRS-related
audit fees are lower in countries with strong legal enforcement regimes.
Goncharov et al. (2014) examine the effect of IFRS adoption on audit fees for a
sample of listed real estate companies in the European community during the period
2001-2008. They further test for the effect of the approach used to record investment
assets (fair value vs cost method) on such a relationship. Their preliminary findings
show that IFRS is not significantly associated with audit fees. When testing for the
interaction between IFRS adoption and the approach used to record investment assets,
they document that firms moving from depreciated cost under domestic standards to
reporting fair value under IFRS have lower audit fees compared to companies
employing depreciated cost.
ARA Finally, Chen (2014) examines the same research question for a sample of 24,112
24,3 firm-year observations from 17 European countries for the period 2000-2009.
Preliminary empirical evidence shows that audit fees have increased subsequent to
IFRS adoption. He further tests for the moderating effect of auditors level of IFRS
expertise defined as the largest market share in the voluntary IFRS adopter sample in
2004 for Big and non-Big 4 auditors[7]. He documents that lower IFRS expertise
346 auditors increase audit fees more than higher expertise auditors for the overall sample,
for Big 4 auditors sub-sample and non-Big 4 auditors group.
4. IFRS adoption and audit market

An important question in audit literature deals with the effect of IFRS adoption on auditor
choice and audit market. At the time of writing, few empirical works have directly
examined this topic and we identify five studies (Comprix et al., 2011; Houqe et al., 2012a;
Chen, 2014; Dinh and Piot, 2014; Wieczynska, 2016) that employ different methodologies.
Comprix et al. (2011) examine the audit switching by listed companies from
14 European Countries during the mandatory transition to IFRS from 2003 to 2007.
They document that the transition to IFRS leads to greater switching in auditor-client
relationships in countries with greater GAAP changes. More specifically, they provide
evidence that firms in countries with greater distance between local GAAP and IFRS
(i.e. more complex audit task in the accounting change process) switch more frequently
from a local auditor to a Big 4 auditor when there is a greater divergence between local
GAAP and IFRS, while smaller clients in countries with fewer GAAP changes more
frequently switch from a Big 4 to a local audit firm. Similarly, Wieczynska (2016)
examines effect of IFRS adoption on the frequency and direction of auditor switching
around the mandatory adoption of IFRS for five European countries (the UK, Germany,
Spain, Italy, and Poland). She documents that firms tend to switch from small audit
firms to global auditors in the year following IFRS adoption and this is particularly true
in countries with strong legal regimes. In addition, firms operating in low-legal regime
are more likely to replace auditor before IFRS adoption.
Houqe et al. (2012a) conduct a cross-country analysis for a sample of 142,193 firm-year
observations from 46 countries over the period 1998-2007. Using logistic regressions,
they test for the effect of IFRS adoption on auditor choice and then for the interaction
between government quality and IFRS adoption in explaining auditor choice. They
document that IFRS adoption increases the likelihood of choosing Big 4 auditors.
Furthermore, firms, operating in countries adopting IFRS characterized by a strong
government quality, are more likely to choose Big 4 rather than non-Big 4 auditors.
Dinh and Piot (2014) examine the association between the switch to IFRS by EU
listed firms and diverse aspects of the audit market concentration. They adopt a
macroeconomic approach, considering concentration metrics at country, and industry
levels. Three main approaches are used to measure market concentration metrics.
The first approach consists of measuring the market share[8] of the two largest
auditors and the concentration ratios for the four and six most important auditors in
the market. In the second approach, they use Hirshman-Herfindahl index, which gives a
more precise picture of the extent of competition as observed via the market share
equilibrium between the main suppliers. Finally, the third approach captures the
dominance situation of some audit firms. Two dominance proxies are used: the first
equals to the standard deviation in the number of audit clients held by the auditors
present on a given market segment and the second equals the average number of
clients per auditor in a given segment. Results show that IFRS adoption is associated
with an increase in auditor industry concentration on a cross-border perspective. IFRS adoption
However, they do not provide evidence that IFRS adoption has a significant effect on and auditing
auditor concentration or dominance at the country level.
Chen (2014) also examines the effect of IFRS adoption on audit market and tests for
the moderating effect of auditors level of IFRS expertise. Findings show that higher
IFRS expertise auditors gain market shares in countries with greater GAAP changes
compared to IFRS. These results remain stable for the overall audit market and within 347
the non-Big 4 market, but not within the Big 4 market.
Overall, it seems that IFRS adoption has had an impact on audit market through
auditor choice (Houqe et al., 2012a), audit industry concentration (Dinh and Piot, 2014)
and auditor switching depending on the degree of divergence between local GAAP and
IFRS (Comprix et al., 2011) and the strength of legal regime (Wieczynska, 2016).
5. IFRS adoption and audit report lag

Empirical studies dealing with the effect of IFRS adoption on audit delays have
generally documented a positive association between the transition to IFRS and audit
report lag. In this regard, Bonson-Ponte et al. (2008) have investigated the association
between the introduction of IFRS (regulatory change) and audit report lag for a sample
105 listed Spanish firms between 2002 and 2005. The results show a positive and non-
significant association between both variables. In the same vain, Habib and Bhuiyan
(2011) and Walker and Hay (2013) examine the same research question in New Zealand
using 502 firm-year observations from 2004 to 2008 and 260 firm-year observations for
the period 2004-2005 from New Zealand public companies, respectively. Both studies
report a significant positive association between IFRS adoption and audit delays
suggesting audit report lag has significantly increased following the adoption of IFRS
in New Zealand. A refined analysis conducted by Habib and Bhuiyan (2011) with
respect to the effect of auditor specialization on such a relationship suggests that this
increase in audit delays is not significant for industry specialist auditors. Similarly,
Amirul and Salleh (2014) examine the relationship between IFRS adoption and audit
delays for sample of 257 listed Malaysian firms over the period 2009-2011. They
document that audit report lag has significantly increased after the convergence to
IFRS. More recently, Habib (2015) examines the same research question in China for a
sample of 9,969 firm-year observations from 2003 to 2011. Findings show that audit
report lag has significantly increased following such transition.
6. Auditor type and IFRS compliance

Another important question in accounting and auditing is whether auditor type plays a role
in enforcing compliance with IFRS. Empirical studies examining this topic consider either
the general compliance with IFRS or the specific compliance with IFRS standards such IAS
12 Differed Tax, IFRS 3 Business Combinations and IAS 36 Impairment of Assets.
For instance, Hodgdon et al. (2009) investigate the effect of auditor type on the
overall IFRS compliance at the international level. The sample consists of 101 firms
that have adopted IFRS voluntarily for the fiscal years 1999 and 2000. Auditor type is
proxied by a dummy variable (1 for Big 5 + 2: KPMG, Price Waterhouse, Coopers and
Lybrand, Ernst & Young, Arthur Andersen, plus BDO and Grant Thornton, and 0
otherwise), while IFRS compliance is measured by a compliance disclosure score and
the Saidin index[9]. Their empirical findings suggest that auditor type has a positive
and significant impact on IFRS compliance.
ARA With respect to specific IFRS standards, Stokes and Webster (2010) investigate the
24,3 effect of auditor type on enforcing IFRS 3 with respect to goodwill impairment.
The sample consists of 1,376 firm-year observations of Australian companies listed on
the Australian Stock Exchange with non-zero goodwill balances during the period 2006-
2008. Auditor type is proxied by a dummy variable (1 for Big 4 and 0 otherwise), while
goodwill impairment is measured as goodwill impairment losses divided by total assets.
348 They show that goodwill impairment charges under IFRS better reflect the underlying
economic value of the goodwill only in the presence of Big 4 auditors. In the same vein,
Glaum et al. (2013) investigate the effect of audit quality (Big 4 vs non-Big 4 auditors)
on the degree of compliance with IFRS 3 and IAS 36 across 17 European countries.
The results show that the presence of Big 4 auditors increases the degree of compliance
with these standards. More recently, Ebrahim (2014) and Ebrahim and Abdel Fattah
(2015) examine the effect of audit quality as proxied by a dummy variable (1 if PWC,
KPMG, E&Y, Deloitte, Mazars and Crowe Horwath International and 0 otherwise) on
the degree of compliance with IAS 12 Deferred Tax in the Egyptian setting. They provide
evidence that compliance with recognition and disclosure requirements of IAS 12 are
significantly related to being audited by one of these audit companies.
Overall, it seems that audit quality, as proxied by the presence of Big 4 auditors or
auditors with international affiliation, is significantly related to IFRS compliance with
respect to the general conformity with IFRS or specific requirements for some IFRS
such as IAS 36 or IFRS 3 (Table I).
7. Future research suggestions

We try in this section to present some research avenues to increase our understanding
of the three topics reviewed and we propose other research suggestions related to
auditing and IFRS in general.
With regard to audit fees and IFRS adoption, more refined analysis should be
conducted to control for auditor switching during the transition period. Accordingly,
future investigations have to consider four groups when studying how IFRS adoption has
affected audit fees: companies that replace local audit firms by Big 4 auditors; companies
that replace Big 4 auditors by local audit firms; companies that remain audited by local
audit firms and companies that remain audited by Big 4 auditors. We note here that Kim
et al. (2012) have signaled that auditor switching may affect their results. However, due to
small rate of auditor switches in their sample, they suggest that this may not introduce
systematic biases to their results. In addition, future meta-analytic research should
consider the association between IFRS adoption and audit fees[10] when more studies are
available to extend the previous meta-analyses of Hay et al. (2006) and Hay (2013) dealing
with the determinants of audit fees. Meta-analysis will offer the possibility to test for
several moderating factors concerning the association between IFRS and audit fees
including audit enforcement, divergence between local GAAP and IFRS based on Ding
et al. (2007) and litigation risk based on Wingates (1997) litigation index.
Furthermore, future research on IFRS and audit fees should consider how the use
of fair value method may affect such a relationship. Finally, Wright and Hobbs (2010,
p. 22) state that Over time, as external auditors gain more experience with IFRS, not to
mention confidence in managements exercise of judgment in interpreting and applying
the new standards, we expect audit fees to decline and return to amounts relatively
comparable to pre-conversion fee levels. Therefore, future research should test this
view and examine whether audit fees have decreased following the transition period
and whether they become comparable to pre-IFRS adoption period.
Theoretical
Authors Research questions underpinnings Sample Main findings
IFRS adoption and audit fees

Griffin et al. The association between IFRS adoption Audit fees are an 653 firm-year IFRS adoption is associated with higher audit
(2009) and audit fees and whether this increasing function of observations from 2002 to fees especially for the second and third years
audit complexity which 2006 in New Zealand
association is moderated by auditor type of IFRS adoption. This association remains
and firm size normally increases under stable after controlling for auditor type and
IFRS firm size
Vieru and The association between IFRS adoption 73 Finnish listed IFRS adoption is associated higher fees paid
Schadewitz and audit and non-audit fees and companies from 2004 (audit and non-audit fees). When they focus
(2010) whether this association is moderated by to 2005 only on audit fees, the association between the
the magnitude of IFRS adjustments magnitude of IFRS adjustments and audit
based on a comparability index between fees becomes insignificant
IFRS and local Finnish GAAP
Lin and Yen The association between IFRS adoption 2,000 Chinese listed IFRS adoption is associated with higher audit
(2011) and audit fees and whether this companies for the two fees. This significant association is more
association is moderated by state periods (2004, 2005, 2006) pronounced under low-state ownership and
ownership and auditor size and (2009, 2010, 2011) when firm is audited by Big 4 auditor
Kim et al. The association between IFRS adoption 2,860 firm-year IFRS adoption is associated with higher audit
(2012) and audit fees and whether this observations from 14 EC fees. This association is more pronounced
association is moderated by audit countries (treatment under high-audit complexity, low-financial
complexity, reporting quality and legal sample) and 9,052 firm- reporting quality and low-legal enforcement
regime year observations from
OECD countries (control
sample) over the period
2004-2008
Yaacob and The association between IFRS adoption 3,050 company-year IFRS adoption is associated with higher
Che-Ahmad and audit fees observations from the audit fees
(2012) companies listed on the
Malaysian stock
exchange from 2004
to 2008
(continued )
IFRS adoption
and auditing
Summary of
reviewed studies
Table I.
349
24,3
350
ARA
Table I.
Theoretical
De George The association between IFRS adoption 907 listed Australian IFRS adoption is associated with higher audit
et al. (2013) and audit fees and whether this companies from 2002 to fees. This association is maintained for either
association is moderated by the 2006 negative or positive equity IFRS adjustments
magnitude of equity IFRS adjustments and it is more significant under higher equity
IFRS adjustments
Cameran The association between IFRS adoption Audit fees are an 136 listed and unlisted IFRS adoption is associated with higher audit
and Perotti and audit fees and whether this increasing function of Italian banks from 1999 to fees especially for the first and second years
(2014) association is moderated by hedge audit complexity which 2006 of IFRS adoption. This association remains
accounting for derivates normally increases under stable when controlling for the presence for
IFRS hedge accounting for derivates
Hassan et al. The association between IFRS adoption 7,958 firm-year IFRS adoption is associated with higher audit
(2014) and audit fees and whether this observations for listed UK fees and this particularly true for non-Big 4
association is moderated auditor size companies from 2003 to auditors
2011
Choi and The association between IFRS adoption 3,293 firm-year IFRS adoption is associated with higher audit
Yoon (2014) and audit fees and whether this observations from South fees and this particularly true for Big 4
association is moderated auditor size Korea over the period auditors
2006-2011
Abu Risheh The association between IFRS adoption 1,274 firm-year IFRS adoption is associated with higher audit
and Al-Saeed and audit fees observations from Jordan fees
(2014) over the period 1998-2011
Goncharov The association between IFRS adoption 480 publicly traded IFRS adoption is not significantly associated
et al. (2014) and audit fees and whether the use of European real estate with audit fees and audit fees are lower for
fair value affects this association firms during the period companies recording property assets at
2001-2008 fair value compared to those using
depreciated cost
(continued )
Theoretical
Chen (2014) The association between IFRS adoption 24,112 firm-year IFRS adoption is significantly associated with
and audit fees and whether auditor observations from 17 audit fees. When testing for the moderating
expertise affects such a relationship; European countries for effect of audit expertise on such an
the period 2000-2009 association, he documents that lower IFRS
expertise auditors increase audit fees more
than higher expertise auditors for the overall
sample, for Big 4 auditors sub-sample and
non-Big 4 auditors group
IFRS adoption and audit market
Comprix The effect of IFRS on the switching The switch to IFRS may Listed companies from Companies in countries with greater
et al. (2011) trend in the auditor-client relationships benefit Big 4 auditors 14 European countries divergence between IFRS and local GAAP
and whether this association is through intellectual during the mandatory frequently switch from local auditor to Big 4
moderated by the degree of divergence barriers to entry for small transition to IFRS from audit firm. For small companies operating in
between IFRS and local GAAP audit firms but increase 2003 to 2007 countries with low divergence between IFRS
the bounded production and local GAAP, they frequently switch from
capacities to respond Big 4 to local auditors
adequately to all audit
demand
Houqe et al. The effect of IFRS adoption on auditor 142,193 firm-year The adoption of IFRS increases the likelihood
(2012a) choice and whether this association is observations from 46 of choosing Big 4 auditors and this is
moderated by government quality countries over the period particularly true for countries characterized
1998 -2007 by high government quality
Dinh and The effect of IFRS adoption on audit 5,466 firm-year IFRS adoption is associated with an increase
Piot (2014) market concentration observations from 22 in auditor industry concentration on a cross-
European countries over border perspective. However, IFRS adoption
the period 2001-2008 does not have a significant effect on
auditor concentration or dominance at the
country level
(continued )
IFRS adoption
and auditing
Table I.
351
24,3
352
ARA
Table I.
Theoretical
Wieczynska The effect of IFRS on the switching 4,245 listed firms from Firms tend to switch from local auditors to
(2016) trend in the auditor-client relationships UK, Germany, Italy, Big 4 auditors during the year following the
and whether this association is Spain, and Poland over IFRS adoption. This is particularly true for
moderated by the strength of legal the period 1998-2010 countries with strong legal enforcement
regime
Chen (2014) The association between IFRS adoption Listed companies from 14 Companies in countries with greater
and audit market and whether auditor European countries divergence between IFRS and local GAAP
expertise affects such a relationship during the mandatory frequently switch from local auditor to Big 4
transition to IFRS from audit firm. For small companies operating in
2003 to 2007 countries with low divergence between IFRS
and local GAAP, they frequently switch from
Big 4 to local auditors
IFRS adoption and audit report lag
Bonson- The association between the IFRS is associated with 105 listed Spanish firms Positive and non-significant association
Ponte et al. introduction of IFRS (regulatory change) more audit risk since between 2002 and 2005 between IFRS and audit report lag
(2008) and audit report lag auditors have to deal with
increased managerial
judgments in terms of
recognition and
classification rules. This
implies lengthy audit
delays
Habib and The association between IFRS and audit 502 firm-year Positive and significant association between
Bhuiyan report lag and whether audit observations from 2004 to IFRS adoption and audit report lag. When
(2011) specialization affects such a relationship 2008 in New Zealand testing for the moderating effect of auditor
specialization, they document that the
association between IFRS adoption and audit
delays is not significant for industry
specialist auditors
(continued )
Theoretical
Walker and The association between IFRS and audit 260 firm-year Positive and significant association between
Hay (2013) report lag observations for the IFRS adoption and audit report lag
period 2004-2005 from
New Zealand public
companies
Amirul and The association between IFRS and audit 57 listed Malaysian firms Positive and significant association between
Salleh (2014) report lag over the period 2009-2011 IFRS adoption and audit report lag
Habib (2015) The association between IFRS and audit 9,969 firm-year Positive and significant association between
report lag observations from 2003 to IFRS adoption and audit report lag
2011 for listed Chinese
companies
Audit quality and IFRS compliance
Hodgdon The effect of auditor type on IFRS Large and international 101 listed firms from The presence of a Big 4 auditor increases the
et al. (2009) compliance audit firms have more several countries for the degree of compliance with IFRS
competitive advantages fiscal years 1999 and 2000
and skills, deep pocket to
control the application of
IFRS which may increase
IFRS compliance
Stokes and The effect of auditor type on enforcing 1,376 firm-year Results show that goodwill impairment
Webster IFRS with respect to goodwill observations of charges under IFRS better reflect the
(2010) impairment Australian companies underlying economic value of the goodwill
listed on the Australian only in the presence of Big 4 auditors
Stock Exchange with non-
zero goodwill balances
during the period
2006-2008
(continued )
IFRS adoption
and auditing
Table I.
353
24,3
354
ARA
Table I.
Theoretical
Glaum et al. The effect of auditor type on the degree 357 firms from 17 The presence of a Big 4 auditor increases the
(2013) of compliance with IAS 36 Impairment European Countries for degree of compliance with IAS 36 and IFRS 3
of Assets and IFRS 3 Business 2005 fiscal year end
Combinations
Ebrahim The effect of auditor type on the degree 118 Egyptian listed The presence of an auditor with international
(2014) and of compliance with IAS 12 differed tax companies from 2007 affiliation increases the degree of compliance
Ebrahim fiscal year end with IAS 12
and Abdel
Fattah
(2015)
With respect to audit market and IFRS adoption, a neglected aspect in this research IFRS adoption
stream is the joint audits which exist in several jurisdictions. Accordingly, future and auditing
research may use multinomial regression analysis (i.e. 2 for two Big 4 auditors; 1 for non-
Big 4 and Big 4 auditors and 0 for two non-Big 4 auditors) to examine such a relationship.
Concerning the effect of IFRS adoption on audit report lag, future research may
examine how auditors IFRS expertise, auditors industry specialization, auditor type and
audit tenure may affect the association between the transition to IFRS and audit delays. 355
With regard to audit quality and IFRS compliance, future research may consider the
effect of IFRS noncompliance and audit opinion and how auditor type may affect such a
relationship. IFRS noncompliance can be proxied by the difference between the
maximum compliance score and compliance score obtained for each firm. In addition, this
stream of research may also consider how audit quality may affect the compliance with
specific IFRS standards such as IFRS 2 Share-Based Payments and IAS 19 Employee
Benefits that may pose some difficulties in their application for professional accountants
(De George et al., 2013). Furthermore, more evidence on the effect of IFRS adoption on
audit report lag and whether audit industry specialization moderates such an association
may also represent an important topic for investigation in the future. Finally, examining
the effect of the presence of Big 4 auditors on the degree of compliance with IFRS in other
developing settings represents also an important future research avenue given the low
accounting and auditing infrastructure[11] in these countries (Ebrahim, 2014).
Other research avenues should be explored in the future. For instance, the effect of
IFRS adoption on audit opinion may represent an interesting research field since IFRS
valuation and recognition rules may affect reported earnings and thus dividend policy.
This may influence management behavior that may be reluctant to some adjustments
proposed by auditors following IFRS adoption.
Aside from archival methodologies which involve the use of historical data dealing
with auditing and IFRS adoption, future research may also focus on experimental or
survey methods. These approaches allow researchers to evaluate how auditors perceive
the transition to IFRS and what are the main difficulties faced when conducting their
audit mission for firms preparing their financial statements under IFRS.
Figure 1 summarizes the reviewed studies and other research topics dealing with
IFRS adoption and auditing that may be explored in the future.
8. Conclusion
In this paper, we discuss extant empirical literature and provide suggestions for future
research on four streams of empirical research related to auditing and IFRS including
IFRS adoption and audit fees, IFRS adoption and audit market, IFRS adoption and
audit report lag and auditor type and IFRS compliance.
Our review reveals four main findings. First, IFRS adoption is associated with
increased audit fees in European countries and other settings that have adopted IFRS
such Australia, Malaysia and New Zealand. However, we argue that this research stream
needs refinement to control for on audit switching during the transition period. Second,
IFRS adoption has had an effect on audit market through auditor choice, audit switching
and audit market concentration. However, we argue that this stream of research is still in
its infancy since empirical evidence is limited. We argue that future research on this topic
may extend its empirical investigations to cover other aspects especially joint auditors
choice. Third, IFRS adoption has had an effect on audit efficiency, as measured by audit
report delay, since this variable has significantly increased following the transition to
IFRS. Finally, our review suggests that audit quality, as proxied by auditor type, may
ARA
Auditor type
24,3
(+)
356
IFRS adoption and
conformity
(?)
(+) (?)
(+) (+)
(0)
Audit
Auditors Audit market
efficiency Audit
perception of (concentration, Audit
through opinion
the transition auditor switching fees
audit
to IFRS and choice)
Figure 1. report lag
Figure summarizing
the reviewed topics
and unexplored
streams of research Notes: (+) positive and significant association; (0) non-significant association;
(?) unexplored association
play an important role in enforcing the compliance with IFRS. However, more empirical
investigations are needed to confirm these findings.
Our study contributes to the accounting and auditing literature in several ways.
First, we review empirical papers dealing exclusively with IFRS and auditing. Second,
we believe that our review has a timely importance for regulators and researchers. For
regulators, our review highlights that IFRS adoption is associated with several costs
and may benefit audit firms with international affiliation compared to local ones and
this may inform regulators in settings that plan to adopt IFRS in the future. For
researchers, our review highlights that more empirical investigations are needed with
respect the effects of IFRS adoption on audit fees, audit market and audit report lag.
In this regard, authors should try to refine their analysis at country and international
level to inform regulators about the real effect of IFRS adoption on audit market and
audit fees. Finally, the question of whether audit quality increases compliance with
IFRS represents an important research topic especially in emerging economies.
Overall, we believe that this is the appropriate time to evaluate what we know and,
more importantly, what we do not know about IFRS and auditing and trace the
development of the streams of empirical research linked to the economic consequences
of IFRS with respect to audit field. We hope that this review will stimulate research in
this field to improve our knowledge about the effect of IFRS adoption on audit market
structure, audit cost and auditor behavior.
Notes IFRS adoption
1. Other streams of empirical research may exist with respect to audit quality such as and auditing
IFRS adoption and earning quality and IFRS adoption and analysts forecasts accuracy.
However, we do not consider them in this review since they have been extensively reviewed
in accounting literature (see for more details Ahmed et al., 2013; Soderstrom and Sun, 2007).
According to Ahmed et al. (2013), these topics relate more to management and financial
analysts behaviors since auditors have the duty to evaluate the credibility of
financial statements.
357
2. As shown in Table AI.
3. The fact that auditors cumulate audit and non-audit services may increase auditors
performance due to the knowledge obtained during the provision of such non-audit services
(Vieru and Schadewitz, 2010). This may translate into lower audit risk and thus a non-
significant increase in audit fees following IFRS adoption.

4. Audit complexity is proxied by the degree to which local GAAP diverge from
IFRS in terms of the absence score which represents the number of accounting rules
regarding particular accounting issues that are missing in (pre-IFRS) local GAAP but
that exist in IFRS and the divergence score that represents the number of accounting
rules regarding the same accounting issue that differ between IFRS and local GAAP
based on Ding et al. (2007).
5. Reporting quality is proxied by absolute value of discretionary accruals as proxied by the
cross-sectional Jones (1991) model and the cross-sectional Dechow and Dichev (2002) model.
6. Legal regime is measured by three proxies including Wingate (1997) litigation index, the
aggregate public enforcement index from La Porta et al. (2006) and dummy variable (1 for
common law country and 0 otherwise).
7. PWC is classified as having high IFRS expertise among the Big 4 auditors, while BDO and
Grant Thornton are classified as having high IFRS expertise among the non-Big 4 auditors.
8. The market shares of audit firms are calculated based on the total assets of their clients.
9. The Saidin index represents another tool to proxy for IFRS compliance and it weights
each disclosure item by the percentage of companies included in the sample that do not
comply with the item (Spetz and Baker, 1999).
10. At the time of writing, we identify only ten studies dealing with this topic. This number does
not allow a reliable meta-analytic analysis.
11. Elad (2015, p. 95) suggests that some developing countries have few trained accountants
and a severe shortage of qualified external auditors.
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Appendix
Country Details of each countrys IFRS adoption

New Zealand IFRS as adopted locally

All listed entities are required to report under accounting standards that are fully
converged with IFRS as issued by the ISAB. There are also several New Zealand
domestic standards that specify requirements in additional to those contained in
international standards
Finland IFRS is required for consolidated financial statements. If listed companies do not
prepare consolidated financial statements, their standalone financial statements are
required to be prepared in accordance with IFRS
China Chinese Accounting Standards (CAS) have substantively converged with IFRS. However,
it is not a direct translation of IFRS. Rather, the principles of IFRS are re-written into a
format that is easily understandable to the Chinese reader. The China standard setter
issued Chinese Accounting Standards in 2006 (effective from January 1, 2007)
Malaysia Malaysian Financial Reporting Standards (MFRS) Reporting Framework is identical to
IFRS. All non-Private Entities1 (except Transitioning Entities (TE)) are required to
apply the MFRS Framework for annual periods beginning on or after January 1, 2012
Australia Australian accounting standards for for-profit entities are consistent with IFRS, with
the exception of some additional disclosure requirements
Italy IFRS are required for consolidated and standalone/separate financial statements
South Korea Adoption of IFRS is required for all listed companies and certain unlisted financial
institutions from 2011
Jordan IFRS are required for consolidated and standalone/separate financial statements
UK IFRS are required for consolidated financial statements. Permitted for standalone/
separate financial statements
Poland IFRS are required for consolidated financial statements of listed companies and for
banks regardless of whether their securities trade in a public market
Spain IFRS is required for consolidated financial statements for listed companies
Germany IFRS are required for consolidated financial statements. As of January 1, 2010, German
Statutory GAAP (HGB) has been updated to be more similar to IFRS than it had
previously been
Greece IFRS are required for consolidated financial statements. This requirement with respect
to listed entities also applies to the subsidiary companies of these listed entities Table AI.
Source: IFRS adoption by country, available at: www.pwc.com/en_US/us/issues/ifrs-reporting/ IFRS adoption
publications/assets/pwc-ifrs-by-country-2014.pdf timeline
Corresponding author
Hichem Khlif can be contacted at: hichemkhlif@gmail.com
For instructions on how to order reprints of this article, please visit our website:
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2.1 IFRS adoption and audit fees

2.2 IFRS and auditor choice

2.3 IFRS adoption and audit report lag

Board adopts a principles-based standard-setting approach which implies that auditors

2.4 Auditor type and compliance with IFRS

3. IFRS adoption and audit fees

Australian setting. Based on sample of sample of 907 listed Australian companies on

3.2 Cross-country empirical studies

4. IFRS adoption and audit market

5. IFRS adoption and audit report lag

6. Auditor type and IFRS compliance

7. Future research suggestions

IFRS adoption and audit fees

significant increase in audit fees following IFRS adoption.

pp. 19-37, available at: http://works.bepress.com/ahmed_ebrahim/5

Country Details of each countrys IFRS adoption

New Zealand IFRS as adopted locally

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