IFRS Convergence and Disclosure Quality: The Role of Audit Quality Moderation (Study on Multinational Companies in Indonesia)

Fatmasari Sukesti,Nurul Nazlia Jamil,Abdul Kharis Almasyhari,Ainulashikin Marzuki

doi:10.13189/ujaf.2022.100108

Abstract

IFRS convergence was initiated through the agreement of the G20 leadership meeting in Washington at 2008. The meeting agreed to use IFRS as an international accounting standard. Adopting IFRS as a single global accounting standard can make Indonesian companies ready and able to transact across countries, or mergers and acquisitions. IFRS supports the readiness of industry in Indonesia to be competitive at the global level. Financial statements based on IFRS produce information more relevant, accurate and more comparable. IFRS can produce valid information on company assets, liabilities, equity, income and expenses. Management will have a high level of accountability to run the company. This study examined the role of audit quality as moderating variable in the relationship between the IFRS convergence and disclosure quality, and studies on multinational companies listed the Indonesian Stock Exchange 2012-2018 period. The research used 63 multinational companies and it tested using the SPSS 25 statistical test tool. The research has proven the effect of IFRS convergence on disclosure quality, and the role of audit quality in strengthening the relationship between the two variables. IFRS convergence applied requires the role of external audit to provide assurance or assurance that the financial statements presented have complied with the standards for preparing financial statements and are fairly presented without material errors.

Highlights

International Financial Reporting Standard (IFRS) has been accepted as a global accounting standard in order to provide quality financial information on international capital markets
Moderating variable is expected to strengthen the relationship between the effects of IFRS convergence on increasing corporate disclosure
The research proved the implementation of IFRS convergence in Indonesia has proven to affect disclosure quality

Summary

Introduction

International Financial Reporting Standard (IFRS) has been accepted as a global accounting standard in order to provide quality financial information on international capital markets. IFRS has been adopted by many countries including the European Union countries, which have used IFRS since 2005 [1]. Canada and several countries in Asia Pacific have converged from their domestic accounting with IFRS. Australia and New Zealand have adopted IFRS since 2005, and the United States replaced the accounting standards to IFRS. Hong Kong, the Philippines and Singapore have adopted IFRS. Since 2008, 80 countries have required companies that have been listed on global stock exchanges to apply IFRS in preparing and presenting their financial reports [1]. The obligation to use IFRS for listed companies is one of the most significant changes in the history of accounting regulations [2]

Methods

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Discussion

Conclusion