Second, even if IAS are higher quality standards, the effects of features of the financial reporting system other than the standards themselves could eliminate any improvement in accounting quality arising from adopting IAS. , , , and suggest that lax enforcement can result in limited compliance with the standards, thereby limiting their effectiveness. and find substantial noncompliance with IAS among firms purportedly applying IAS. In particular, for the 279 firms that refer to application of IAS in their 1998 financial statements, examine disclosed accounting policies for consistency with major IAS pronouncements. The study finds that, in many cases, disclosed accounting policies are inconsistent with IAS. examine timely loss recognition for firms in Hong Kong, Malaysia, Singapore, and Thailand. In these countries, accounting standards are largely derived from common law and, therefore, likely are similar to IAS. find that timely loss recognition for firms in these countries is no better than it is for firms in code law countries. attribute this finding to differing incentives of managers and auditors. find that strong legal systems are associated with less earnings management. The study attributes this finding to different incentives created by market pressures and institutional factors to report earnings that reflect economic performance.


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