The International Standards on Auditing as a convergence parameter between US GAAP and IFRS

Kanellos Toudas

doi:10.22495/cbv14i3art2

Abstract

The present study involves the US GAAP and IFRS accounting frameworks, and how these are evaluated by accounting professionals in four (4) European countries, two of which have been severely impacted by the global economic crisis (Greece and Portugal) and two that remained relatively strong during the period of the European economic crisis (France and Germany). The main purpose of the study is to point out that the economy of a country does indeed affect the perception of listed companies towards a potential convergence. The issues that arise are of interest of the global accounting and auditing community, as well as this study. Academic literature has not shown much interest in recent years. In contrast, the professional bibliography is very rich and has greatly enhanced the bibliographic review. The results of the quantitative study reveal that there are differences between the factors affecting a potential convergence at a country level, as well as at an economy level. Stronger economies seem to pay more attention to economic and regulatory factors, and weaker economies seem more reluctant towards coordination and cooperation in order for the convergence to be achieved.

Highlights

Globalisation and seeking capital on international capital markets requires an appropriate economic environment for businesses, where common procedures and the adoption of common standards when preparing and auditing financial statements exist
The evolution of the accounting standards in this international economic environment has led to the convergence and alignment of International Financial Reporting Standards (IFRS) with US GAAP, along with each country’s national accounting standards, and the International Auditing Standards
The main purpose of this study is to a) investigate the factors that impede the convergence of the two accounting frameworks (IFRS and US GAAP), and b) determine whether there are differences between countries that were more affected by the European financial crisis

Summary

Introduction

Globalisation and seeking capital on international capital markets requires an appropriate economic environment for businesses, where common procedures and the adoption of common standards when preparing and auditing financial statements exist. The diversity in accounting standards results from cultural, economic, historical, legal and political factors and it reflects the uniqueness and specific economic needs of each nation (Carslaw, 1999; Dzinkowski, 2001), and in a modern economic environment, corporations operate in multiple nations. These companies are obliged to apply international accounting standards when preparing their financial statements. Auditors of multinational companies should take into account the differences in standards when they check the financial statements of these companies

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Conclusion