THE EFFECTS OF THE INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) ON FINANCIAL STATEMENTS AUDIT IN GHANA

ABSTRACT This study sought to examine the influence of IFRS adoption on audit fees. The study also examined the impact of IFRS adoption on the timeliness of audit reports. The study further sought to identify aspects of the IFRSs that pose compliance challenges. The study employed panel regression analysis to address the influence of IFRS adoption on audit fees as well as on audit report timeliness. The data used was drawn from the audited annual reports of thirty-six (36) firms observed over the period 2005 to 2011 making 252 firm-year observations. The regression results were generated from the Stata software programme. The study employed interview and content analysis of audit reports to identify specific aspect(s) of IFRS that pose compliance challenges to firms. The study finds that the adoption of IFRS significantly and positively impact audit fees. On audit report timeliness, the study found significant positive association between IFRS adoption and audit report lag. The panel regression results show that adopting IFRS significantly increases audit fees and lengthens the number of days it takes auditors to sign off audit reports. Per the audit reports reviewed, the study identified IAS 19 Employee Benefits as the key standard not strictly adhered to. The interview responses revealed that standards requiring Fair Value basis of measurement and those relating to Financial Instruments, Employee Benefits, Share-based Payments and Income Tax tend to pose greater compliance challenges. The study further observed that corporate managers, without strict enforcement measures, are susceptible to deliberately not comply with certain standards if the perceived repercussion on financial performance is detrimental. By implication, the study shows that major changes in accounting standards can increase agency costs and therefore the cost of financial reporting, and as well dampen information quality by delaying reporting timeliness.