International Financial Reporting Standards, Reporting Quality And Audit Fee Of Financial Institutions In Ghana

Abstract

his study examined the effect of International Financial Reporting Standard (IFRS) adoption on financial reporting quality (earnings management) and audit fees in the financial institutions in Ghana. It also explored the relation between the reporting quality and audit fees. A panel regression model is used to determine the effect of the IFRS adoption on reporting quality as well as audit fees. The data used was drawn from the audited annual report of 23 universal banks and 28 insurance companies observed over the period 2003 to 2014. The empirical result indicates that financial institutions exhibit less earnings management after IFRS adoption. It also finds that higher fees are paid after the transition to the new accounting standard. Furthermore, the study finds a statistically significant negative relationship between measures of reporting quality and level of audit fees. Overall, the study result indicates that the adoption and implementation of IFRS has brought about an improvement in the quality of financial reporting among financial institutions in Ghana. However, it implementation has been accompanied with high audit fees. The results documented in this study add to the dearth of literature on IFRS adoption and earnings management among financial institutions from the perspective of an emerging market. The results of this study contribute additional evidence to the few literature on the impact of IFRS adoption on financial sector and more especially the insurance industry which has been ignored by most researchers. This is one of the few studies that directly examine the cost of implementing IFRS with a focus on audit fees. The study therefore contributes to the debate on IFRS adoption and financial reporting quality and its relation with audit fees.