To begin with, Corporate Governance may influence information asymmetry between the company’s owners and investors. In this research, the following two questions will be paramount to assigning a concrete scope to the overall objective. The first question is, by adopting IFRS in our financial reporting, to what extent will the magnitude of corporate governance impart asymmetry in financial statements/reporting between companies and stakeholders? This leads to the second question: How much value is added regarding returns to the shareholder by aligning the scope of Corporate Governance and IFRS?
Before 1970, a specific type of international financial reporting method appeared as one of the preferred standards worldwide. International Financial Reporting Standards (IFRS), as published by the International Accounting Standards Board (IASB), have been implemented in more than ninety countries; however, major countries like the USA, Japan, India, and the GCC region have not provided their concurrence, but they state that the adoption is in the pipeline.
The IFRS adoption rate is very low when comparing the US region with developed European countries. GAAP principally influences IFRS; European countries that went through the process of colonization by the United Kingdom are more prone to adopting IFRS.
In a pacified way, the acceleration rate of publicly listed corporations, shareholders, and investors adopting IFRS is weak in strengthening the market capitalization growth. Their main concern was that financial reporting and financial statements lacked transparency, accountability, fairness, and independent decision-making.
To put it crudely, the non-implementation of IFRS led to engineered financial reporting in the US, which witnessed massive financial frauds and corruption. Various companies and auditing firms operating in the country could face severe repercussions, where the bourse market will be accessible to foreign investment. This poses a big doubt on the mechanism of Corporate Governance and Audit Quality, administered in the organization operating in the US, and the upheaval of terrorism funding through reputable corporations.
The abovementioned issues will motivate the regulators to adopt IFRS to enhance the scope of Corporate Governance and Audit Quality (transparency, accountability, credibility, and fairness) for full disclosure and transparency.
However, with the emphasis on Audit Quality and Corporate Governance in the US, the shareholders will be comfortable making educated investment decisions due to the implementation of IFRS. With this approach, financial reporting and the financial statement will ensure disclosures and complete transparency.
The looming dilemma that is shadowing the US region is the tortoise-paced adoption of IFRS, which is leading to ineffective corporate governance and a low level of audit quality. The imprecise and inferior quality of financial reporting to the owners, regulators, and the masses has corroded the echelon of confidence of all relevant stakeholders just because they could not implement IFRS in due time.
In the last decade, organizations have forfeited and faced capital inadequacy due to weak Corporate Governance. All the factors mentioned earlier can be ascribed to inefficient Corporate Governance, overlooking ethical considerations, which preceded an increase in fraud, and mishandling insider trading, which will affect overall financial reporting.
Various studies have been conducted to circumvent the topic, but when it comes to applying the concept in the US region, there is not enough empirical research available. This article will rationalize the relationship between Corporate Governance and Audit Quality. Both the scenarios, i.e., pre- and post-adoption of IFRS, will be gauged to witness if the aim of enhancing financial transparency was achieved through Corporate Governance and Audit Quality. Hence, this research will be willing to bridge this gap.
Firms operating in the US are enhancing their financial reporting and accounting practices as the region ventures into accounting standards that reduce financial information asymmetry, fortify transparency, and reduce misleading accounting practices and fraudulent activities.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
