Previous studies on the effect of International Financial Reporting Standards (IFRS) on accounting quality often have difficulties to control for confounding factors on accounting quality. As a result, the observed changes in accounting quality could not be attributed mainly to IFRS. We use a unique research setting to address this issue by comparing the accounting quality of publicly listed companies in 15 member states of the European Union (EU) before and after the full adoption of IFRS in 2005. We use five indicators as proxies forWe would like to thank participants of research seminar accounting quality. We find that the majority of accounting quality indicators improved after IFRS adoption in the EU. That is, there is less of managing earnings toward a target, a lower magnitude of absolute discretionary accruals, and higher accruals quality. But our results also show that firms engage in more earnings smoothing and recognize large losses in a less timely manner in post-IFRS periods. In addition, we examine the effects of institutional variables on financial reporting quality. Our contribution to the literature is that we show the improved accounting quality is attributable to IFRS, rather than changes in managerial incentives, institutional features of capital markets, and general business environment, etc.

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The audit ‘expectation gap’ is a crucial issue associated with the independent auditing function and has significant implications on the development of auditing standards and practices. Through a questionnaire survey, this study investigated the rise of ‘expectation gap’ and related auditing issues under business and auditing environment in the People's Republic of China. The results reveal that the role and benefits of public accounting (independent auditing) had been positively recognized by Chinese audit beneficiaries and auditors, and there were increasing demands for expanding the applicability of public accounting. This study obtained substantial evidence on the emergence of audit ‘expectation gap’ in China, with respect to audit objectives, auditor's obligation to detect and report fraud, auditor independence, and third party liability of auditors. The causes and practical implications of the ‘expectation gap’ are therefore analyzed contextual to the present practices of public accounting in changing Chinese social and economic conditions. This study should cast light on understanding of the institutional setting and recent development of independent audits in China.

This paper reports the findings of an investigation, through a series of interviews, into the role of the supervisory board (SB) in Chinese listed companies. The interviews were conducted and analysed using the grounded theory methodology. It is found that the SB performs one of four roles under the Chinese corporate environment: an honoured guest, a friendly advisor, a censored watchdog or an independent watchdog. The role of the SB is dependent on a variety of factors: SB characteristics, power relations between the Board of Directors and the SB, shareholding structure, the influence of the Communist Party of China and government, the role of independent directors and the requirements of the corporate law.