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The Effects of Out†of†Regime Guidance on Auditor Judgments About Appropriate Application of Accounting Standards

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  • H. Scott Asay
  • Tim Brown
  • Mark W. Nelson
  • T. Jeffrey Wilks

Abstract

Accountants making judgments with respect to a particular set of standards are increasingly aware of standards from other reporting regimes that offer additional or conflicting guidance. In fact, IFRS encourages reliance on out†of†regime standards when IFRS lacks guidance. This paper reports the results of two experiments which provide evidence that auditors in such circumstances are vulnerable to contrast effects, whereby reporting judgments under IFRS are systematically influenced away from the accounting treatment supported by standards from another regime (U.S. GAAP). Contrast effects are observed (i) when out†of†regime standards are considered before making a reporting judgment under IFRS, and (ii) when out†of†regime standards are applied as local GAAP for a subsidiary of a foreign parent that reports under IFRS. We also find that contrast effects are reduced when auditors believe IFRS lacks guidance. These results have implications for financial statement preparers and auditors in the current incomplete†convergence environment.Les comptables qui portent des jugements sous le régime d'un ensemble de normes particulier sont de mieux en mieux renseignés sur l'existence de normes appartenant à d'autres régimes d'information financière qui fournissent des indications supplémentaires ou conflictuelles. En fait, il est recommandé dans les IFRS que l'on s'appuie sur les normes hors régime lorsque les IFRS ne fournissent pas suffisamment d'indications. Les auteurs font état des résultats de deux expériences qui démontrent que les auditeurs, en pareilles circonstances, sont vulnérables aux effets de contraste, selon lesquels les jugements portés sous le régime des IFRS en matière d'information financière tendent systématiquement à s’éloigner du traitement comptable préconisé par les normes d'un autre régime (celui des PCGR des États†Unis). Les effets de contraste sont observés 1) lorsque des normes hors régime sont prises en compte avant qu'un jugement ne soit porté sous le régime des IFRS en matière d'information financière et 2) lorsque des normes hors régime sont appliquées à titre de PCGR nationaux à une filiale d'une société mère étrangère à laquelle s'appliquent les IFRS. Les auteurs constatent également que les effets de contraste s'atténuent lorsque les auditeurs estiment que les IFRS ne fournissent pas suffisamment d'indications. Ces résultats ont des conséquences pour les préparateurs et les auditeurs d’états financiers dans le contexte actuel de convergence partielle.

Suggested Citation

  • H. Scott Asay & Tim Brown & Mark W. Nelson & T. Jeffrey Wilks, 2017. "The Effects of Out†of†Regime Guidance on Auditor Judgments About Appropriate Application of Accounting Standards," Contemporary Accounting Research, John Wiley & Sons, vol. 34(2), pages 1026-1047, June.
  • Handle: RePEc:wly:coacre:v:34:y:2017:i:2:p:1026-1047
    DOI: 10.1111/1911-3846.12281
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    Cited by:

    1. Darius Fatemi & John Hasseldine & Peggy Hite, 2020. "The Influence of Ethical Codes of Conduct on Professionalism in Tax Practice," Journal of Business Ethics, Springer, vol. 164(1), pages 133-149, June.

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