Nonprofit organizations worldwide are confronted with an increasing demand for accountability and improved financial transparency. Financial reporting by nonprofit organizations is no longer an exception; it has become a rule.The usefulness of a financial report to an organization’s stakeholders depends on its quality. The latter is safeguarded by reporting standards as well as the commitment of the organization to fully implement these standards. Although resource dependence and coercive isomorphism have been used in earlier nonprofit organization research, no empirical research has linked these theories to compliance with financial reporting standards. Using a unique setting in which a large number of (very) large Belgian nonprofit organizations are confronted with far-reaching changes in financial reporting regulations, the effect of resource dependence and coercive isomorphism on accounting and financial reporting compliance is documented.

Prior research has documented earnings management in for‐profit settings. Non‐profit organizations are thought to pay less attention to the bottom line and earnings management research has therefore focused on the manipulation of expenses in order to improve efficiency ratios or taxable income, not reported earnings per se. Considering an institutional setting characterized by the absence of such ratios and the presence of important subsidies, management of the actual bottom line is analyzed in light of these subsidies. The results suggest that organizations drive their results toward zero profit, which is intensified by increased governmental funding when unmanaged results are positive. The relation between downward earnings management and the presence of subsidies is particularly evident for organizations whose accumulated reserves are high. Copyright © 2012 ASAC. Published by John Wiley & Sons, Ltd.

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This study examines economic consequences of auditor choice in the Belgian nonprofit (NP) setting, where the identity of both the audit firm and the audit partner is required to be disclosed. Specifically, we examine the influence of auditor choice in favor of an auditor with industry expertise on future contributions (being the sum of donations and grants) received among a large sample of Belgian nonprofit organizations (NPOs). Consistent with a signaling perspective, our results indicate that NPOs benefit from engaging an audit partner with industry expertise, by positively influencing future contributions received by the NPO. However, we observe no significant effect of audit firm industry expertise on future contributions received. Our results therefore suggest that NPOs’ resource providers presume that industry expertise is situated at the signing partner level rather than at the audit firm level.

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