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Corporate Disclosure Quality: Lessons from Australian Companies on the Impact of Adopting International Financial Reporting Standards
Author(s) -
Gallery Gerry,
Cooper Emerson,
Sweeting John
Publication year - 2008
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.2008.0030.x
Subject(s) - accounting , business , audit , discretion , profitability index , quality (philosophy) , sample (material) , audit committee , index (typography) , international financial reporting standards , quality audit , finance , philosophy , chemistry , epistemology , chromatography , world wide web , political science , computer science , law
For annual reporting periods beginning on or after 1 January 2005, Australian companies were required to comply with the Australian equivalents of International Financial Reporting Standards (AIFRS). To ensure a smooth transition, a broadly defined standard (AASB 1047) mandated pre‐adoption company disclosures of the AIFRS' impact. The standard provided managers with the opportunity to exercise considerable discretion in complying with the underlying disclosure requirements. We examine how this discretion impacted on the quality of pre‐adoption AIFRS disclosures provided by a sample of large Australian companies. Using a disclosure quality index, we find considerable evidence of a cross‐sectional variation in disclosure quality that varies according to differences in the AIFRS financial impact, size, industry and profitability factors. Importantly, we also observe individual Big 4 audit firm influences on disclosure quality. These findings highlight consequences of mandating corporate disclosures based on broadly defined principles.