The Effect of Mandatory XBRL A
The Effect of Mandatory XBRL A
The Effect of Mandatory XBRL A
www.emeraldinsight.com/1743-9132.htm
Abstract
Purpose – The purpose of this paper is to evaluate the impact of the International Financial Reporting
Standards (IFRS) and eXtensible Business Reporting Language (XBRL) on audit fees based on
evidence from listed companies operating in an emerging economy. Whilst IFRS constitute high-
quality accounting standards, XBRL represents a technology standard that can enhance the usability
of IFRS and overall financial reporting transparency.
Design/methodology/approach – Multivariate analyses are used on a sample of 1,798 firm-year
observations between 2000 and 2011 from companies listed in the Shanghai Stock Exchange that were
subject to XBRL and IFRS adoption mandates.
Findings – The main results suggest that XBRL has a main negative effect on audit fees which is
weaker for larger firms. Additionally, the authors find that IFRS increases audit fees for all companies.
Whilst this effect is positive for firms of different sizes, it is weaker for larger firms.
Research limitations/implications – Whilst the findings are applicable to the selected sample and
may or may not be generaliseable to other economies, they can provide important implications for both
regulators and companies that are undertaking IFRS convergence and XBRL implementation projects
in developing economies around the world.
Originality/value – This study offers a timely assessment of the economic consequences of IFRS and
XBRL on listed companies operating in an emerging economy, in addition to providing an important
basis upon which further research can be designed in order to extend the analysis.
Keywords China, IFRS, XBRL, Audit fees, Firm size
Paper type Research paper
1. Introduction
The global financial reporting environment has been undergoing significant changes in
the last decade. One of the key changes concerns the adoption of the International
Financial Reporting Standards (IFRS). The IFRS are principles-based standards that
are developed by the International Accounting Standards Board (IASB) to improve the
quality of accounting principles (Chen and Zhang, 2010) and represent uniform global
accounting principles which are expected to enhance financial reporting quality
(Tyrrall et al., 2007), reduce risk and cost of capital (Leuz and Verrecchia, 2000),
facilitate international investment and enhance global economic growth (Street and
Bryant, 2000; Pacter, 2001; Ball, 2006; Pickard, 2007; Chen and Zhang, 2010; Peng and
Bewley, 2010; De George et al., 2013). In addition to IFRS, other changes concern
ongoing efforts to address transparency, efficiency and accuracy problems in relation International Journal of Managerial
Finance
to financial reporting which are, at least partially, attributable to the formats in which Vol. 12 No. 2, 2016
pp. 109-135
financial reports are produced and disseminated. Existing paper and digital formats © Emerald Group Publishing Limited
1743-9132
(e.g. HTML, PDF, MS Excel) lack interchangeability in the ways in which financial data DOI 10.1108/IJMF-12-2013-0139
IJMF are collected, stored, processed, integrated, repurposed and reported. These formats
12,2 also do not offer sufficient semantics to enable the automated analysis of financial
reports, making the realisation of efficient and effective transparency and compliance
objectives expensive or even elusive (Debreceny et al., 2010).
The eXtensible Business Reporting Language (XBRL) is a data formatting standard
that enables the electronic communication of financial reports (Li et al., 2007; Rezaee,
110 2009; Troshani and Doolin, 2007; Troshani and Rao, 2007; Troshani and Lymer, 2010).
XBRL can enhance the usability of accounting standards such as IFRS (Bergeron,
2003), streamline and integrate information flows amongst heterogeneous
organisations by facilitating the exchange of financial data amongst their disparate
computer platforms and software applications. In doing so, XBRL can generate
enormous efficiencies in the business information supply chain whilst enforcing the
application of accounting standards. As a result, XBRL systems address current
financial reporting problems including transparency whilst also facilitating company
efforts to cost effectively achieve legislative compliance in relation to financial
reporting (Abdolmohammadi et al., 2002; Doolin and Troshani, 2004, 2007; Pinsker and
Li, 2008; Troshani and Lymer, 2010, 2011; Troshani et al., 2015).
Thus, IFRS and XBRL can have an important impact on auditing functions
generally and audit costs specifically. The objective of this paper is to address the
following research question:
RQ1. What is the effect of IFRS and XBRL on audit fees? Is such effect moderated
by firm size?
We focus on auditing as it constitutes an important activity in the business information
supply chain. It evaluates the accuracy and fairness of financial statements relative
to a jurisdiction’s generally accepted accounting principles (GAAP) and accounting
standards (Arens et al., 2007). As a result, auditing enhances the credibility of the firms
that produce them. This can, in turn, make it less costly for them to raise capital and
achieve investment growth (Khurana and Raman, 2004) whilst also facilitating
compliance with financial reporting legislation (Li et al., 2007; Rezaee, 2009). Drawing
on the work of De George et al. (2013), we argue that examining audit fees is useful
as it allows us to gain insight into the effect of IFRS and XBRL on the audit function
since audit fees constitute directly measurable and observable cash outflows of
audited firms.
To address our research questions we focus on listed companies in China for a
number of reasons. Since China has mandated both IFRS and XBRL use for financial
reporting for listed firms, it presents an ideal setting to investigate our research
questions (XBRLChina, 2004; Li, 2006; Peng and Bewley, 2010; IFRSChina, 2014).
Whilst China constitutes a unique setting featuring a single party political system with
extensive state ownership of business enterprises and centralised control of economy, it
also features many characteristics of emerging economies, including the desire to
attract foreign direct investment into China; list Chinese-owned companies overseas;
enhance the credibility of the accounting profession; and enhance the infrastructure
supporting efficient capital markets (Peng and Bewley, 2010). Emerging economies,
including China, anticipate that IFRS adoption constitutes a necessary condition for
modernising their economies and capital markets (Peng and Bewley, 2010). Finally,
representing the fastest emerging economy, China is having an increasing impact on
the world economy, which suggests that IFRS adoption can have important practical
implications for investors and academics alike (Peng and Bewley, 2010).
We focus on XBRL adoption in China since XBRL was mandated for use by listed XBRL and
companies in China from April 2004 (XBRLChina, 2004; KPMG, 2011), which makes IFRS adoption
China one of the early adopters of XBRL.
There are a number of studies that have investigated either IFRS or XBRL use in a
and audit fees
number of jurisdictions. For example, prior studies have examined the impact of IFRS on
auditing in Australia (De George et al., 2013), China (Wang et al., 2009; Chen and Zhang,
2010; Peng and Bewley, 2010) and European Union (Kim et al., 2012). To our best 111
knowledge, the only study that has empirically examined the impact of XBRL on
financial statement auditing is that of Shan and Troshani (2014) that focuses on the
impact of XBRL on audit fees on US listed companies during 2009-2011. We have found
no study concerning the impact of XBRL and IFRS on audit fees. Consequently, this
study fills an important gap by both extending existing literature in relation to the
economic impact of XBRL generally with a focus on a mandatory environment in an
emerging economy (Rao et al., 2013). Specifically, this study contributes by providing
evidence concerning the impact of IFRS-convergent accounting standards and XBRL on
financial reporting quality and transparency as measured by audit fees. Specifically, we
find that XBRL has a main negative effect on audit fees which is weaker for larger firms.
While XBRL is being used by listed firms in China, we also find that IFRS increases audit
fees for all companies. This effect is positive for firms of various sizes, though weaker for
larger companies. As China is not alone amongst emerging and growing economies
worldwide that are considering and adopting both IFRS and XBRL, our findings can,
thus, inform the strategies of accounting regulators internationally (Liu et al., 2011).
This study and its findings are important for many reasons. First, whilst studies
exist that have examined the impact of IFRS (Chen and Zhang, 2010; Kim et al., 2012;
De George et al., 2013) or XBRL use on audit fees (Shan and Troshani, 2014) separately,
no research has been found that examines the impact of both XBRL and IFRS on audit
fees. This is important as the use of IFRS and XBRL can have offsetting or
complementary effects. Additionally, IFRS critics argue that single standards may not
be suitable for all jurisdictions and settings, and thus, may not equally improve
financial reporting quality and transparency due to specific country differences
(Soderstrom and Sun, 2007). This suggests that assessments of IFRS/XBRL practices
need to be made on a country-by-country basis and therefore further strengthens the
motivation for this study (Nobes, 2006). Second, much of the research on audit fees to
date focuses on developed economies including the USA, Australia, Canada and Hong
Kong whilst research on emerging economies is limited. By focusing on China, this
study is also contributing by improving current understanding concerning the
determinants of audit fees in emerging economies (Wang et al., 2009). Thus, we focus on
IFRS in China since China’s national accounting standards are considered to be
substantially converged with IFRS from 2007 by all listed companies (Li, 2006; Peng
and Bewley, 2010; IFRSChina, 2014).
This paper is structured as follows. Before examining related literature and
developing our hypotheses, we discuss IFRS convergence in China. Research design is
subsequently examined before results are discussed and conclusions made.
4. Research design
Data
This study investigates the impact of XBRL and IFRS on audit fees with data sourced
from listed companies in the SHSE. The SHSE became the world’s sixth largest stock
market with a market capitalisation of US$2.3 trillion as of the end of 2011 and is
treated as the vane of economic reform and capital market in China.
The data for this study were sourced from the Thomson Reuters database. As
shown in Figure 1, the duration of 12 years commencing in 2000 until 2011 was selected
which includes the time spans of 2000-2003 and 2004-2011, denoted as pre-XBRL and
post-XBRL mandate, respectively (XBRLChina, 2004), and the time spans of 2000-2006
and 2007-2011 which are denoted as pre-IFRS and post-IFRS convergence, respectively.
As shown in Table I, a total of 9,645 listed companies on SHSE issued A-Shares
between 2000 and 2011. However, since reporting audit fees is voluntary, many Chinese
companies do not disclose audit fees (Lin and Liu, 2009) which results in a significant
reduction in observations. After removing missing data, financial institutions and
insurance companies, the final data set consists of 1,798 firm-year observations.
Dependent variable
Prior studies have commonly used audit fees as a proxy of audit cost in firms (e.g.
O’Sullivan, 2000; Boo and Sharma, 2008; Elder et al., 2009; Leventis et al., 2011; Zaman
et al., 2011; Fleischer and Goettsche, 2012). Following these studies, we use the natural
logarithm of total audit fees (AUDITFEES) paid by company i in fiscal year t as the
dependent variable.
Independent variables
Independent variables in this study consist of XBRL, IFRS and FIRMSIZE. Following
Premuroso and Bhattacharya (2008), XBRL is a dichotomous variable to measure
whether the company files its financial statements in XBRL format, coded as 1 if
the company is an XBRL filer for the years after the XBRL mandate came into effect,
i.e., 2004 onwards, 0 otherwise for the years prior to the XBRL mandate. According to
Liu et al. (2011), IFRS is a dichotomous variable that measures whether financial
statements are prepared in accordance with IFRS, i.e., coded as 1 when companies
lodge their financial statements for the years post-IFRS convergence, i.e., 2007
onwards, 0 otherwise for the years prior to IFRS convergence. The relationship
between firm size and audit quality has been widely examined in previous research
(Abbott et al., 2007; Gul et al., 2007; Premuroso and Bhattacharya, 2008). Consistent
with prior research, in this study, we measure firm size (FIRMSIZE) as the natural
logarithm of total assets of company i at the end of fiscal year t.
Control variables
Consistent with prior related research, we define the control variables as follows. Change
of earnings per share (ΔEPS) is computed as the difference between EPS for company i at
the end of fiscal year t and EPS for company i at the end of fiscal year t−1 (Chen and
Zhang, 2010); change of sales ratio (ΔSALES) is calculated as the difference between
sales for company i at the end of fiscal year t and sales for company i at the end of fiscal
year t−1, divided by sales for company i at the end of fiscal year t−1 (Houqe et al., 2012);
debt-to-equity ratio (DERATIO) is measured as the ratio of long-term debt to total equity
for company i at the end of fiscal year t (Seetharaman et al., 2002); Tobin’s Q (TOBINSQ)
represents a market performance indicator and is computed as the ratio of market value XBRL and
of stock and book value of debt, divided by book value of total assets, for company i at IFRS adoption
the end of fiscal year t (Shan, 2014); Big 4 auditor (BIG4) is coded as 1 if the company is
audited by a Big 4 auditor, 0 otherwise (Premuroso and Bhattacharya, 2008); year
and audit fees
dummy (YEAR) represents the year effect reflecting the years between 2000 and 2011;
industry dummy (INDUSTRY) reflects the company’s industry in accordance with the
industry classification of the China Securities Regulatory Commission. 119
Model development and diagnostics
This study builds on the model of Shan and Troshani (2014) as the basic model to
examine the hypotheses and investigate whether there is an interaction between IFRS
and XBRL use and firm size on firm audit fees in the selected SHSE firms (see Table I):
AUDITFEESi ¼ a þ b1 IFRSi þ b2 XBRLi þ b3 FIRMSIZEi þ b4 IFRSi FIRMSIZEi
þ b5 XBRLi FIRMSIZEi þ b6 DEPSi þ b7 DSALESi þ b8 DERATIOi
X
8 X
11
þ b9 TOBINSQi þ b10 BIG4i þ gj YEARi þ Zk INDUSTRYi þ ei
j¼1 k¼1
(1)
We extend the work of Shan and Troshani (2014) by investigating the interaction of
IFRS and firms size, in addition to the interaction of XBRL and firm size in an emerging
economy, namely, China.
5. Results
Descriptive statistics
The descriptive statistics of key variables in our model are provided in Table II.
Accordingly, the mean (median) for audit fees is RMB172,819 (129,314) for all
years, with a mean (median) of RMB125,492 (102,744) and RMB185,350 (137,310) for the
pre- and post-XBRL mandate periods, respectively, and a mean (median) of RMB131,926
(101,722) and RMB215,346 (151,752) for the pre- and post-IFRS convergence periods,
respectively. The mean (median) for firm size is RMB321,980,003 (288,440,678) for all
years, with a mean (median) of RMB183,917,896 (205,303,514) and RMB366,679,967
(338,488,271) for the pre- and post-XBRL mandate years, respectively; and a mean
(median) of RMB217,998,775 (222,402,642) and RMB447,863,923 (421,782,358) for the pre-
and post-IFRS convergence periods, respectively (see Figure 1)[2].
The descriptive statistics of the control variables are shown in Panel A of Table II.
The mean (median) for the change of EPS is 0.01 (0.003) for all years with a range of
−0.18 to 0.19, and the mean (median) for the change of sales ratio is 0.27 (0.2) for all
years with a range of −0.74 to 3.74. The mean (median) for the long-term debt-to-equity
ratio is 0.35 (0.11) for all years with a range of 0.00 to 3.91. The mean (median) for
Tobin’s Q, the market performance indicator, is 1.28 (1.04).
120
IJMF
Table II.
even if the correlation value is small (Gujarati, 2003). The results, reported in Panel B of
Table III, show that the largest VIF is 1.49 and that the VIFs of all other independent
variables are well below the critical value of 10. Thus, the regression model has no
evidence of multicollinearity.
Table IV provides the regression results of the multivariate model to examine the
impact of independent variables (Column (1)) and the interactive effects of XBRL and
IFRS with firm size (Column (2)) on audit fees. The regression results are characterised
by an adjusted R2 of 0.5582 with an F-statistic of 284.8 and an adjusted R2 of 0.5621
with an F-statistic of 231.64, respectively[3]. The high adjusted R2s and F-statistics
suggest that the dependent variable – AUDITFEES is well explained by the
independent variables and the interactive effects of XBRL and IFRS with firm size.
The results, shown in Column (1) of Table IV, reveal a positive coefficient for IFRS
with a statistical significance ( β ¼ 0.195, t ¼ 4.29, p o 0.001). We infer that the
significantly positive relationship between IFRS convergence and audit fees is caused
by the complexity of audit tasks, the quality of financial statements and legal regime in
China (Kim et al., 2012). These complex tasks can increase the number of hours worked
by external auditors and additional information disclosure that IFRS compliance
entails (Choi and Mueller, 1984; De George et al., 2013).
The results indicate a weakly negative coefficient for XBRL ( β ¼ −0.114, t ¼ −1.88,
p o 0.1). This suggests that the auditing of financial statements of listed companies in
XBRL format was facilitated. Consequently, XBRL has contributed by reducing
auditing costs by improving accessibility and disclosure and facilitating analytical
reviews carried out by auditors on financial statements that are in XBRL format
resulting in reduced costs of financial statement auditing as also evidenced across a
number of studies focusing on XBRL adoption in China and indicative XBRL benefits
on financial statement auditing (Xiao et al., 2004; Chen and Liu, 2008; Kernan, 2008;
IJMF Model without interactive effect Model with interactive effect
12,2 Column (1) Column (2)
Independent variable Expected sign β t β t
where AUDITFEES ¼ natural logarithm of audit fees; IFRS ¼ preparing financial statements in
accordance with IFRS, coded as 1 if IFRS is applied, 0 otherwise; XBRL ¼ filing financial statement in
XBRL format, coded as 1 if company is an XBRL filer, 0 otherwise; FIRMSIZE ¼ natural logarithm of
value of total assets at the end of fiscal year; ΔEPS ¼ change of EPS, EPSt−EPSt−1; ΔSALES ¼ change
of sales ratio, (SALESt−SALESt−1)/SALESt−1; DERATIO ¼ long-term debt to total equity;
TOBINSQ ¼ Tobin’s Q, market value of stock and book value of debt divided by book value of total
assets; BIG4 ¼ BIG4 ¼ Big 4 auditor, coded 1 if the firm is audited by a Big4 auditor, 0 otherwise; Year
dummy (YEAR) represents dummy variables that reflect the years between 2000 and 2011; Industry
dummy (INDUSTRY) reflects the company’s industry in accordance with the industry classification of
Table IV. the CSRC.
Regression results Notes: *p o0.05; **p o0.01; ***p o 0.001; ****p o0.10. All tests are two-tailed
Ye and He, 2008; Zion et al., 2008; Gao, 2011; Han and Liu, 2011; Peng et al., 2011; Jimei
et al., 2013; Li et al., 2013; Rao et al., 2013; Liu et al., 2014; Wang et al., 2014).
Additionally, the internal controls of filers were enhanced, which may suggest that
other relevant costs in relation to auditing, such as verification costs and substantive
tests were reduced (Chen and Liu, 2008; Rezaee, 2009; Gao, 2011; Han and Liu, 2011;
Chen and Rezaee, 2012). The positive association between firm size and XBRL on audit
fees may be indicative of firm size effects, that is, large companies are more likely to
have more complex accounts, transactions, as well as a higher risk in potential
litigation and goodwill loss (Firth, 1985) and higher political costs due to public
visibility (Premuroso and Bhattacharya, 2008) than smaller companies.
As far as H1 is concerned, the results, shown in Column (2) of Table IV, reveal that
IFRS increases audit fees for all firms, with the negative coefficient for
IFRS×FIRMSIZE ( β ¼ −0.135, t ¼ −4.2, p o 0.001) indicating that this effect is weaker XBRL and
for larger firms. Thus, H1 is supported. One possible way to explain this could be that IFRS adoption
whilst IFRS might increase firms’ audit fees, larger firms have a stronger bargaining
power and thus could be in a better position to negotiate better terms with audit firms.
and audit fees
This may explain why the positive association between IFRS and audit fees is weaker
amongst large firms. Yet another way to explain this finding could be that large firms
are more likely to have more effective corporate governance mechanisms in place 123
which can reduce the positive association between IFRS and their audit fees.
With the H2 concerning the interactive impact of XBRL and firm size on audit fees, we
find a weak correlation between the XBRL × FIRMSIZE and AUDITFEES (β ¼ 0.085,
t ¼ 1.7, po0.1). Although the coefficient is incremental, the combined values of the
coefficients (−1.248) for XBRL, FIRMSIZE and XBRL × FIRMSIZE were clearly reduced
since XBRL filing was mandated in China. This conclusion is evident by the coefficient
of FIRMSIZE and the coefficient of XBRL × FIRMSIZE resulting in a decrease of
293 per cent. Thus, our results indicate that XBRL has a main negative effect on audit
fees which is weaker for larger firms. Thus, H2 is supported. Possible explanations of the
positive coefficient might be related to the set-up and training costs and time required in
the short-term which might be more substantial for larger firms; the coefficient is likely to
become negative in the longer term (Shan et al., 2015).
With the control variables, we find that the DERATIO, TOBINSQ and BIG4 are
positively correlated with audit fees, whereas ΔEPS reveals negative associations.
The other control variable, ΔSALES, is found to have no impact. Year dummies are
significant for all years except 2006, 2008 and 2009.
Robustness checks
The robustness of our primary results was evaluated in five ways. First, Ramsey’s
Regression Specification Error Test (RESET) was conducted to determine the potential
of nonlinear partial effects of omitted variables in the regression model. The RESET
complete the second, third and fourth powers of fitted variables. The results (not
reported in this paper) show that individual t-statistics are insignificant, which indicate
that there is no nonlinear effect. This confirms that the linear regression model is a
statistically appropriate model specification.
Second, we winsorized all continuous variables at the 1st and 99th percentile to
assess the potential impact of outliers. The results (not reported in this paper) indicate
that there are no differences with the primary findings.
Third, we regrouped our data set by firm size (FIRMSIZE), i.e., a data set comprising
899 observations that FIRMSIZE is greater than the median and another data set
comprising 899 observations that FIRMSIZE is smaller than the median. The results
(not reported in this paper) indicate that there are no differences with the primary
findings, except the insignificant coefficient of IFRS×FIRMSIZE for smaller companies.
This finding confirms our primary finding for H1, i.e., IFRS reporting costs become a
burden for smaller companies (Hail et al., 2010).
Fourth, prior studies conduct change analyses (Kim et al., 2012; Holm and
Thinggaard, 2014). For example, Kim et al. (2012) examine whether the change of audit
fees is associated with changes of the independent variables with the intention of
mitigating concerns about potential problems of correlated omitted variables. Similarly,
Holm and Thinggaard (2014) modified a change model of audit fees using first-
differences over time of the variables. Accordingly, we develop a change model to test
both H1 and H2 and investigate whether and how change variables are different from
IJMF our primary results. The change model (Model (2)) is specified by computing change in
12,2 the variables that appear in Model (1):
DAUDITFEESi ¼ a þ b1 IFRSi þ b2 XBRLi þ b3 DFIRMSIZEi
þ b4 IFRSi DFIRMSIZEi þ b5 XBRLi DFIRMSIZEi
124 þ b6 DEPSi þ b7 DSALESi þ b8 DDERATIOi þ b9 DTOBINSQi
X
8 X
11
þ b10 BIG4i þ gj YEARi þ Zk INDUSTRYi þ ei (2)
j¼1 k¼1
Table V reports the results of the change model (Model (2)), focusing on the testing of
H1 and H2.
The results of Column (1) of Table VI indicate a positive coefficient for IFRS ( β ¼ 0.269,
t ¼ 5.43, po0.001) and a weakly negative coefficient for XBRL ( β ¼ −0.112, t ¼ −1.69,
po0.1), and the results of Column (2) report a weakly negative coefficient for
IFRS×FIRMSIZE ( β ¼ −0.065, t ¼ −1.73, po0.1) and a weakly positive coefficient for
XBRL×FIRMSIZE ( β ¼ 0.104, t ¼ 1.7, po0.1). These findings are consistent with our
primary results. We also note that both corporate governance variables, i.e. BDINDP and
SBSIZE, are not significant in either model (see Columns (1) and (2) of Table VI). Therefore,
we conclude that the primary results are not influenced by corporate governance variables.
6. Conclusion
We set out to investigate the following research question:
RQ1. What is the effect of IFRS and XBRL on audit fees? Is such effect moderated
by firm size?
Whilst IFRS constitute high quality accounting standards, XBRL represents a
technology standard that can enhance IFRS usability. With the increasing importance of
auditing, we argue that IFRS and XBRL can affect auditing functions amongst
companies that have adopted them and have offsetting impacts. Specifically, in this
paper we have assessed the impact of IFRS and XBRL on audit fees by using evidence
from companies listed in the SHSE in China. There is paucity of research concerning the
IJMF Model without interactive effect Model with interactive effect
12,2 Column (1) Column (2)
Independent variable Expected sign β t β t
where AUDITFEES ¼ natural logarithm of audit fees; IFRS ¼ preparing financial statements in
accordance with IFRS, coded as 1 if IFRS is applied, 0 otherwise; XBRL ¼ filing financial statement in
XBRL format, coded as 1 if company is an XBRL filer, 0 otherwise; FIRMSIZE ¼ natural logarithm of
value of total assets at the end of fiscal year; ΔEPS ¼ change of EPS, EPSt−EPSt−1; ΔSALES ¼ change
of sales ratio, (SALESt−SALESt−1)/SALESt−1; DERATIO ¼ long-term debt to total equity;
TOBINSQ ¼ Tobin’s Q, market value of stock and book value of debt divided by book value of total
assets; BIG4 ¼ BIG4 ¼ Big 4 auditor, coded 1 if the firm is audited by a Big4 auditor, 0 otherwise;
BDINDEP ¼ board independence, the proportion of independent directors to all directors on the board;
Table VI. SBSIZE ¼ the number of members on the supervisory board; Year dummy (YEAR) represents dummy
Robustness check: variables that reflect the years between 2000 and 2011; Industry dummy (INDUSTRY) reflects the
corporate company’s industry in accordance with the industry classification of the CSRC.
governance factors Notes: *p o0.05; **p o0.01; ***p o 0.001; ****p o0.10. All tests are two-tailed
effect of XBRL and IFRS on audit fees, and investigating their joint use in firms is
important as they can have offsetting impacts on audit fees (Kim et al., 2012).
Additionally, as IFRS critics argue that single standards may not be suitable for all
jurisdictions, IFRS may not equally enhance financial reporting quality and transparency
due to specific country differences (Soderstrom and Sun, 2007) suggesting that IFRS/
XBRL practices need be assessed on a country-by-country basis (Nobes, 2006).
We find that XBRL has a main negative effect on audit fees which is weaker for larger
firms. Our findings also indicate that IFRS increases audit fees for all companies, and that
this effect is positive for firms of different sizes though weaker for larger companies. We XBRL and
argue that our findings contribute to the existing body of knowledge by providing IFRS adoption
empirical evidence from listed companies in one of the largest economies in the world,
China, indicating that IFRS and XBRL do impact on auditing costs of companies that
and audit fees
have adopted them. Thus, this study contributes to the ongoing debate concerning
whether the economic benefits of IFRS and XBRL are materialising in practice.
As others, this study also suffers from several limitations. This study provides a 127
focused assessment of the impact of IFRS and XBRL on audit fees of companies listed
in the SHSE in China which may or may not be generaliseable to other economies. For
example, we have focused on listed companies in the SHSE due to data availability
considerations (e.g. audit fees data). Nevertheless, we argue that our findings and
conclusions provide an important basis upon which further research can be designed in
order to extend this analysis. For example, further research can be conducted to
confirm (or refute) whether our findings apply in other economies such as the UK, the
Netherlands, Singapore and South Korea, where both IFRS and XBRL have been
adopted in order to enhance the generaliseability of our findings.
Furthermore, this study has also ignored how auditing processes are influenced as a
result of using IFRS and XBRL. Whilst IFRS convergence in an emerging economy
such as China is necessary it is not by itself sufficient to achieve high accounting
standards. Infrastructure support for enhancing widespread understanding amongst
Chinese accountants, oversight and enforcement of the proper application of IFRS
principles is also essential for the successful implementation of IFRS and need to be
considered in relation to the manner in which they impact on auditing fees.
Additionally, whilst current auditing practices are generally effective in providing
some assurance of financial statements, they typically discover materials
misstatements and fraud after these have adversely affected companies (Rezaee,
2009). Whilst IFRS offers high quality accounting standards, XBRL can enable
continuous auditing cost-effectively, and in doing so, it can reduce or potentially
eliminate the time lag between the occurrence of accounting events and assurance
services carried out by auditors (Rezaee, 2009). That is, together IFRS and XBRL can
reduce the risk of fraud or material misstatements by potentially identifying these
sooner by enhancing the monitoring roles of auditors and regulators in relation
financial statements for both individual companies and capital markets (Roohani et al.,
2009; Srivastava and Kogan, 2010). Further research could, therefore, also explore
qualitatively how IFRS and XBRL are affecting the scope of the traditional audit
function and the manner in which internal control activities are being carried out
(Srivastava and Kogan, 2010).
Nevertheless, our findings have important implications for regulators, auditors and
companies that are undertaking IFRS convergence and XBRL implementation projects in
developing economies around the world. Based on our findings, regulators may need to
consider how IFRS and XBRL compliance requirements and transition programmes may
be better tailored for companies in order to reduce possible compliance stress in order to
enhance transition and minimise disruption in business operations (De George et al., 2013).
Additionally, our findings offer evidence supporting the business case of XBRL
adoption in jurisdictions where XBRL use has been mandated (e.g. the USA, UK, South
Korea, Japan, the Netherlands) whilst also informing the development of XBRL
diffusion strategies in jurisdictions where XBRL use is voluntary (e.g. Australia) or
currently still being considered. Whilst to the best of our knowledge there is little
evidence to suggest whether or how XBRL filings are being audited in all jurisdictions
IJMF where XBRL use has been mandated (notable exceptions focusing on the US include
12,2 Janvrin et al., 2010; Brands, 2013; Holzinger, 2013; La Rosa and Caserio, 2013; Roselli,
2013; Tysiac, 2013; Boyle et al., 2014; Shan and Troshani, 2014), being the first to
address the impact of IFRS and XBRL, our study also can offer evidence to auditing
practitioners that XBRL can reduce auditing costs and therefore encourage auditing of
XBRL filings. Additionally, with auditing costs being reduced as a result of XBRL,
128 auditors can reconsider the allocation of scarce internal auditing resources to other
financial reporting activities after XBRL is introduced (Helliar et al., 1996).
Furthermore, our findings have wider implications as increased financial reporting
transparency through XBRL use can reduce information asymmetry between
management and shareholders and enhance the credibility of firms resulting in an
overall improvement of investor confidence in today’s capital markets.
Notes
1. Convergence of accounting standards is a process that denotes the “development of a single
set of high quality, understandable and enforceable global accounting standards” (Pacter,
2001, p. 67).
2. The corresponding natural logarithm values used in the analysis can be found in Table II.
3. In the study of Shan and Troshani (2014) the value of the adjusted R2 is 0.7405 which is
relatively higher than the corresponding R2 in this study.
References
Abbott, L.J., Parker, S., Peters, G.F. and Rama, D.V. (2007), “Corporate governance, audit quality,
and the Sarbanes-Oxley Act: evidence from internal audit outsourcing”, The Accounting
Review, Vol. 82 No. 4, pp. 803-835.
Abdolmohammadi, M., Harris, J. and Smith, K. (2002), “Goverment financial reporting on the
internet: the potential revolutionary effects of XBRL”, Journal of Goverment Financial
Management, Vol. 51 No. 2, pp. 24-26, 28-31.
Adams, M.B. (1994), “Agency theory and the internal audit”, Managerial Auditing Journal, Vol. 9
No. 8, pp. 8-12.
Alleyne, P., Hudaib, M. and Pike, R. (2013), “Towards a conceptual model of whistle-blowing
intentions among external auditors”, The British Accounting Review, Vol. 45 No. 1, pp. 10-23.
Arens, A.A., Elder, R.J., Beasley, M.S. and Splettstoesser-Hogeterp, I.B. (2007), Auditing and Other
Assurance Services, 10th ed., McGraw-Hill, Toronto.
Ball, R. (2006), “International Financial Reporting Standards (IFRS): pros and cons for investors”,
Accounting and Business Research, Vol. 36 No. S1, pp. 5-27.
Barth, M.E., Landsman, W.R. and Lang, M.H. (2008), “International accounting standards and
accounting quality”, Journal of Accounting Research, Vol. 46 No. 3, pp. 467-498.
Bergeron, B. (2003), Essentials of XBRL: Financial Reporting in the 21st Century, John Wiley &
Sons Inc., Hoboken, NJ.
Bizarro, P.A. and Garcia, A. (2010), “XBRL-beyond basics”, The CPA Journal, Vol. 80 No. 5,
pp. 62-71, available at: http://viewer.zmags.com/publication/3d5e33a6#/3d5e33a6/64
Boo, E. and Sharma, D. (2008), “Effect of regulatory oversight on the association between internal
governance characteristics and audit fees”, Accounting and Finance, Vol. 48 No. 1, pp. 51-71.
Boyle, D.M., Boyle, J.F. and Carpenter, B.W. (2014), “The sec’s renewed focus on accounting XBRL and
fraud”, The CPA Journal, Vol. 84 No. 2, pp. 68-72, available at: http://viewer.zmags.com/
publication/73a0f1e9#/73a0f1e9/74
IFRS adoption
Brands, K. (2013), “XBRL and the audit data standards”, Institute of Management Accountants, NJ,
and audit fees
available at: www.readperiodicals.com/201312/3166708831.html (accessed 4 January 2014).
Casterella, J.R., Francis, J.R., Lewis, B.L. and Walker, P.L. (2004), “Auditor industry specialization,
client bargaining power, and audit pricing”, Auditing: A Journal of Practice & Theory, 129
Vol. 23 No. 1, pp. 123-140.
CEC (2011), “Commission delegated Regulation (EU) No …/.. of 21.12.2011 amending Regulation
(EC) No 809/2004 implementing Directive 2033/71/EC of the European Parliament and of
the Council as regards elements related to prospectuses and advertisements”, Council of
the European Union, Brussels, available at: register.consilium.europa.eu/pdf/en/11/st18/
st18987.en11.pdf (accessed 17 September 2013).
Chen, C.J.P., Gul, F.A. and Su, X. (1999), “A comparison of reported earnings under Chinese GAAP
via IAS: evidence from the Shanghai Stock Exchange”, Accounting Horizons, Vol. 13 No. 2,
pp. 91-111.
Chen, J.J. and Cheng, P. (2004), “Enforcement mechanisms and Chinese”, 2nd International
Conference on Corporate Governance, University of Birmingham, Birmingham, 29 June.
Chen, J.J. and Zhang, H. (2010), “The impact of regulatory enforcement and audit upon
IFRS compliance – evidence from China”, European Accounting Review, Vol. 19 No. 4,
pp. 665-692.
Chen, S., Sun, Z. and Wang, Y. (2002), “Evidence from China on whether harmonised accounting
standards harmonise accounting practices”, Accounting Horizons, Vol. 16 No. 3, pp. 183-197.
Chen, W. and Liu, S.F. (2008), “Study on audit evidence gathering cost under online auditing
environment”, 2008 IEEE International Conference on Systems, Man and Cybernetics,
IEEE, Singapore, pp. 2876-2880, available at: http://ieeexplore.ieee.org/xpl/login.jsp?tp ¼ &
arnumber ¼ 4811734&url ¼ http%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.
jsp%3Farnumber%3D4811734 (accessed 12 November 2013).
Chen, Y. and Rezaee, Z. (2012), “The role of corporate governance in convergence with IFRS:
evidence from China”, International Journal of Accounting and Information Management,
Vol. 20 No. 2, pp. 171-188.
Choi, F. and Mueller, G. (1984), International Accounting, Prentice Hall, Englewood Cliffs, NJ.
Cohen, J., Krishnamoorthy, G. and Wright, A. (2004), “The corporate governance mosaic and
financial reporting quality”, Journal of Accounting Literature, Vol. 23 No. 1, pp. 87-154,
available at: www2.bc.edu/~cohen/Research/Research4.pdf
Cormier, D., Demaria, S., Lapointe-Antunes, P. and Teller, R. (2009), “First-time adoption of IFRS,
managerial incentives, and value-relevance: some French evidence”, Journal of
International Accounting Research, Vol. 8 No. 1, pp. 1-22.
Deangelo, L. (1981), “Auditor size and audit quality”, Journal of Accounting and Economics, Vol. 3
No. 3, pp. 183-199.
Debreceny, R., Farewell, S., Piechocki, M., Felden, C. and Gräning, A. (2010), “Does it add up?
Early evidence on the data quality of XBRL filings to the SEC”, Journal of Accounting and
Public Policy, Vol. 29 No. 3, pp. 296-306.
De George, E.T., Ferguson, C.B. and Spear, N.A. (2013), “How much does IFRS cost? IFRS
adoption and audit fees”, The Accounting Review, Vol. 88 No. 2, pp. 429-462.
Deloitte (2008), IFRS Survey: Where Are We Today?, Deloitte & Touche LLP, New York, NY.
Deloitte (2012), “Use of IFRS by jurisdiction”, Deloitte, London, available at: www.iasplus.com/en/
resources/ifrs-topics/use-of-ifrs (accessed 4 January 2014).
IJMF Diehl, K.A. (2010), “The real cost of IFRS: the relationship between IFRS implementation
and audit, tax, and other auditor fees”, International Research Journal of Finance and
12,2 Economics, No. 37, pp. 96-101, available at: www.internationalresearchjournaloffinanceand
economics.com/irjfe_issues.htm
Doolin, B. and Troshani, I. (2004), “XBRL: a research note”, Qualitative Research in Accounting
and Management, Vol. 1 No. 2, pp. 93-104.
130 Doolin, B. and Troshani, I. (2007), “Organizational adoption of XBRL”, Electronic Markets, Vol. 17
No. 3, pp. 199-209.
Dopuch, N. and Simunic, D. (1982), “The nature of competition in the auditing profession: a
descriptive and normative view”, in Buckley, J.W. and Weston, J.F. (Eds), Regulation and
the Accounting Profession, Lifetime Learning, Belmont, CA, pp. 77-94.
Eccles, R.G. and Krzus, M.P. (2010), One Report: Integrated Reporting for a Sustainable Strategy,
Wiley, NJ.
Elder, R., Zhang, Y., Zhou, J. and Zhou, N. (2009), “Internal control weaknesses and client risk
management”, Journal of Accounting, Auditing and Finance, Vol. 24 No. 4, pp. 543-579.
Firth, M. (1985), “An analysis of audit fees and their determinants in New Zealand”, Auditing:
A Journal of Practice & Theory, Vol. 4 No. 2, pp. 23-37.
Fleischer, R. and Goettsche, M. (2012), “Size effects and audit pricing: evidence from Germany”,
Journal of International Accounting, Auditing, and Taxation, Vol. 21 No. 2, pp. 156-168.
Francis, J.R. (2004), “What do we know about audit quality?”, The British Accounting Review,
Vol. 36 No. 4, pp. 345-368.
Francis, J.R. and Wilson, E.R. (1988), “Auditor changes: a joint test of theories relating to agency
costs and auditor differentiation”, The Accounting Review, Vol. 63 No. 4, pp. 663-682.
Fritz, S. and Lammle, C. (2003), “The international harmonisation process of accounting
standards”, working paper, Ekonomiska Institutionen, Stockholm.
Fung, S.Y.K., Gul, F.A. and Krishnan, J. (2012), “City-level auditor industry specialization,
economies of scale, and audit pricing”, The Accounting Review, Vol. 87 No. 4, pp. 1281-1307.
Gao, J. (2011), “XBRL financial report audit model and realization mechanism”, 2011
International Conference on Business Management and Electronic Information (BMEI),
IEEE, Guangzhou, pp. 382-385, available at: http://ieeexplore.ieee.org/xpl/login.jsp?tp ¼ &
arnumber ¼ 5916953&url ¼ http%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.
jsp%3Farnumber%3D5916953 (accessed 12 November 2013).
Gujarati, D.N. (2003), Basic Econometrics, 4th ed., McGraw-Hill, New York, NY.
Gul, F.A. and Tsui, J.S.L. (2001), “Free cash flow, debt monitoring, and audit pricing: further
evidence on the role of director equity ownership”, Auditing: A Journal of Practice &
Theory, Vol. 20 No. 1, pp. 72-84.
Gul, F.A., Jaggi, B.L. and Krishnan, G.V. (2007), “Auditor independence: evidence on the joint
effects of auditor tenure and nonaudit fees”, Auditing: A Journal of Practice & Theory,
Vol. 26 No. 2, pp. 117-142.
Hail, L., Leuz, C. and Wysocki, P. (2010), “Global accounting convergence and the potential
adoption of IFRS by the United States (Part I): conceptual underpinnings and economic
analysis”, Accounting Horizons, Vol. 24 No. 3, pp. 355-394.
Han, G. and Liu, Y. (2011), “The application of XBRL in Chinese enterprises under the information
processing environment”, 2011 International Conference on Information Technology,
Computer Engineering and Management Sciences (ICM), IEEE, Nanjing, pp. 239-241,
available at: http://ieeexplore.ieee.org/xpl/login.jsp?tp ¼ &arnumber ¼ 6113737&url ¼ http
%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D6113737
(accessed 12 November 2013).
Helliar, C., Lyon, B., Monroe, G.S., Ng, J. and Woodliff, D.R. (1996), “UK auditors’ perceptions of XBRL and
inherent risk”, The British Accounting Review, Vol. 28 No. 1, pp. 45-72.
IFRS adoption
Holm, C. and Thinggaard, F. (2014), “Leaving a joint audit system: conditional fee reductions”, and audit fees
Managerial Auditing Journal, Vol. 29 No. 2, pp. 131-152.
Holzinger, A. (2013), “New Robocop tasked with busting fraudulent financial report filers”,
The Institute of Internal Auditors, Financial Services Auditors, FL, available at: www.
theiia.org/fsa/2013-features/new-robocop-tasked-with-busting-fraudulent-financial-report- 131
filers/?staticReset&hardreset (accessed 4 January 2014).
Houqe, M.N., Monem, R.M. and Zijl, T.V. (2012), “Government quality, auditor choice and
adoption of IFRS: a cross country analysis”, Advances in Accounting, Vol. 28 No. 2,
pp. 307-316.
IASB (2006), China Affirsm Commitment to Converge with IFRSs, IASB, London, available at:
www.ifrs.org/News/Announcements-and-Speeches/Pages/China-affirms-commitment-to-
converge-with-IFRSs.aspx (accessed 17 September 2013).
ICAEW (2007), “EU implementation of IFRS and fair value directive: report for the European
Commission”, Institute of Chartered Accountants in England & Wales, London.
IFRSChina (2014), “IFRS application around the world. Jurisdiction profile: People’s Republic of
China”, IFRS, London, available at: www.ifrs.org/Use-around-the-world/Documents/
Jurisdiction-profiles/China-IFRS-Profile.pdf (accessed 5 January 2014).
Janvrin, D., Caster, P. and Elder, R. (2010), “Enforcement release evidence on the audit
confirmation process: implications for standard setters”, Research in Accounting
Regulation, Vol. 22 No. 1, pp. 1-17.
Jeanjean, T. and Stolowy, H. (2008), “Do accounting standards matter? An exploratory analysis of
earnings management before and after IFRS adoption”, Journal of Accounting and Public
Policy, Vol. 27 No. 6, pp. 480-494.
Jensen, M. and Meckling, W. (1976), “Theory of the firm: management behavior, agency costs and
ownership structure”, Journal of Financial Economics, Vol. 3 No. 4, pp. 305-360.
Jermakowicz, E.K. and Gornik-Tamaszewski, S. (2006), “Implementing IFRS from the perspective
of EU publicly traded companies”, Journal of International Accounting, Auditing, and
Taxation, Vol. 15 No. 2, pp. 170-196.
Jimei, L., Yuzhou, H. and Meijie, D. (2013), “XBRL in the Chinese financial ecosystem”, IT Pro,
Vol. 15 No. 6, pp. 36-42.
Kernan, K. (2008), “XBRL around the world: a look beyond US shores to put the SEC’s interactive
data initiative in a global context”, Journal of Accountancy, Vol. 206 No. 4, pp. 62-66,
available at: www.journalofaccountancy.com/Issues/2008/Oct/XBRLAroundTheWorld.htm
Khadaroo, I. (2005), “Corporate reporting on the internet: some implications for the audit
profession”, Managerial Auditing Journal, Vol. 20 No. 6, pp. 578-591.
Khurana, I.K. and Raman, K.K. (2004), “Litigation risk and the financial reporting credibility of
big 4 versus non-big 4 audits: evidence from Anglo-American countries”, The Accounting
Review, Vol. 79 No. 2, pp. 473-495.
Kim, J.B., Liu, X. and Zheng, L. (2012), “The impact of mandatory IFRS adoption on audit fees:
theory and evidence”, The Accounting Review, Vol. 87 No. 6, pp. 2061-2094.
KPMG (2007), International Financial Reporting Standards: The Quest for a Global Language,
KPMG LLP, London.
KPMG (2011), Automating Business Reporting: Performance Insight Through Better Busienss
Reporting, KPMG, Melbourne, available at: www.kpmg.com/AU/en/IssuesAndInsights/
ArticlesPublications/Better-Business-Reporting/Documents/automating-business-reporting.
pdf (accessed 4 October 2013).
IJMF KPMG (2012), Improving Governance with XBRL, KPMG, London, available at: www.kpmg.com/
Global/en/WhatWeDo/Special-Interests/XBRL/Pages/Improving-governance-with-XBRL.
12,2 aspx (accessed 9 October 2012).
Larcker, D.F. and Richardson, S.A. (2004), “Fees paid to audit firms, accrual choices, and
corporate governance”, Journal of Accounting Research, Vol. 42 No. 3, pp. 625-658.
La Rosa, F. and Caserio, C. (2013), “Are auditors interested in XBRL? A qualitative survey of big
132 auditing firms in Italy”, in Mancini, D., Vaassen, E.H.J. and Dameri, R.P. (Eds), Accounting
Information Systems for Decision Making, Springer, New York, NY, pp. 13-45.
Leuz, C. and Verrecchia, R. (2000), “The economic consequences of increased disclosure”, Journal
of Accounting Research, Vol. 38, Supplement, pp. 91-124.
Leventis, S., Weetman, P. and Caramanis, C. (2011), “Agency costs and product market
competition: the case of audit pricing in Greece”, The British Accounting Review, Vol. 43
No. 2, pp. 112-119.
Li, H. (2006), Framework and Implementation of Chinese Accounting Standards System for
Business Enterprises, Ministry of Finance, Shanghai, available at: www.afdc.org.cn/upload/
355/downloads/1-4li%20hongxia.pdf (accessed 17 September 2013).
Li, J.J., Wang, F.S. and Gong, Y.F. (2013), “Influence of XBRL on the accounting information
quality”, 2013 International Conference on Management Science & Engineering: IEEE,
Harbin, pp. 1511-1517.
Li, Y., Roge, J.N., Rydl, L. and Hughes, J. (2007), “Achieving Sarbanes-Oxley compliance with
XBRL-based ERP and continuous auditing”, Issues in Information Systems, Vol. 8 No. 2,
pp. 430-436.
Lin, Z.J. and Liu, M. (2009), “The impact of corporate governance on auditor choice: evidence from
China”, Journal of International Accounting, Auditing, and Taxation, Vol. 18 No. 1, pp. 44-59.
Liu, C., Yao, L.J., Hu, N. and Liu, L. (2011), “The impact of IFRS on accounting quality in a
regulated market: en empirical study of China”, Journal of Accounting, Auditing and
Finance, Vol. 26 No. 4, pp. 659-676.
Liu, C., Luo, X., Sia, C.L., O’farrell, G. and Teo, H.H. (2014), “The impact of XBRL adoption in PR
China”, Decision Support Systems, Vol. 59, pp. 242-249.
Marston, C. and Polei, A. (2005), “Corporate reporting on the internet by German companies”,
International Journal of Accounting Information Systems, Vol. 5 No. 3, pp. 285-311.
Meek, G.K., Roberts, C.B. and Gray, S.J. (1995), “Factors influencing voluntary annual report
disclosures by US, UK and continental European multionational corporations”, Journal of
International Business Studies, Vol. 26 No. 3, pp. 555-572.
Nikkinen, J. and Sahlström, P. (2004), “Does agency theory provide a general framework for audit
pricing?”, International Journal of Auditing, Vol. 8 No. 3, pp. 253-262.
Nobes, C. (2006), “The survival of international differences under IFRS: towards a research
agenda”, Accounting and Business Research, Vol. 36 No. 3, pp. 233-245.
O’Sullivan, N. (2000), “The impact of board composition and ownership on audit quality: evidence
from large UK companies”, The British Accounting Review, Vol. 32 No. 4, pp. 397-414.
Pacter, P. (2001), “What exactly is convergence?”, International Journal of Accounting, Auditing
and Performance Evaluation, Vol. 2 Nos 1-2, pp. 67-83.
Peng, E.Y., Shon, J. and Tan, C. (2011), “XBRL and accruals: empirical evidence from China”,
Accounting Perspectives, Vol. 10 No. 2, pp. 109-138.
Peng, S. and Bewley, K. (2010), “Adaptability to fair value accounting in an emerging economy: a
case study of China’s IFRS convergence”, Accounting, Auditing & Accountability Journal,
Vol. 23 No. 8, pp. 982-1011.
Peng, S. and Van Der Laan Smith, J. (2010), “Chinese GAAP and IFRS: an analysis of the XBRL and
convergence process”, Journal of International Accounting, Auditing, and Taxation, Vol. 19
No. 1, pp. 16-34.
IFRS adoption
Peng, S., Tondkar, R.H., Van Der Laan Smith, J. and Harless, D.W. (2008), “Does convergence of
and audit fees
accounting standards lead to convergence of accounting practices? A study from China”,
The International Journal of Accounting, Vol. 43 No. 4, pp. 448-468.
Pickard, G. (2007), “Simplifying global accounting”, Journal of Accountancy, Vol. 204 No. 1, pp. 36-39. 133
Pinsker, R. and Li, S. (2008), “Costs and benefits of XBRL adoption: early evidence”,
Communications of the ACM, Vol. 51 No. 3, pp. 47-50.
Premuroso, R.F. and Bhattacharya, S. (2008), “Do early and voluntary filers of financial information
in XBRL format signal superior corporate governance and operating performance?”,
International Journal of Accounting Information Systems, Vol. 9 No. 1, pp. 1-20.
PWC (2011), XBRL Reporting Risk and the Role of Internal Audit, PricewaterhouseCoopers LLP,
San Jose, CA, available at: www.pwc.com/en_US/us/internal-audit/publications/assets/
xbrl-reporting-risk-and-internal-audit.pdf (accessed 14 November 2013).
Ragothaman, S. (2012), “Voluntary XBRL adopters and firm characteristics: an empirical analysis”,
The International Journal of Digital Accounting Research, Vol. 12 No. 1, pp. 93-119.
Rao, Y., Guo, K. and Hou, J. (2013), “Who extends the extensible? The effects of corporate
governance on XBRL taxonomy extensions in China”, International Journal of Accounting
and Information Management, Vol. 21 No. 2, pp. 133-147.
Rediker, K.J. and Seth, A. (1995), “Boards of directors and substitution effects of alternative
governance mechanisms”, Strategic Management Journal, Vol. 16 No. 2, pp. 85-99.
Reynolds, J.K. and Francis, J.R. (2001), “Does size matter? The influence of large clients on office-
level auditor reporting decisions”, Journal of Accounting and Economics, Vol. 30 No. 3,
pp. 375-400.
Rezaee, Z. (2009), Corporate Governance and Ethics, John Wiley & Sons, Hoboken, NJ.
Roohani, S., Furusho, Y. and Koizumi, M. (2009), “XBRL: improving transparency and monitoring
functions of corporate governance”, International Journal of Disclosure and Governance,
Vol. 6 No. 4, pp. 355-369.
Roselli, L. (2013), “Challenges with XBRL”, Financial Executives Research Foundation (FERF),
Danvers, MA, available at: www.financialexecutives.org/ferf/download/2013%20Final/
2013-027.pdf (accessed 12 November 2013).
Sarens, G. and Abdolmohammadi, M.J. (2011), “Monitoring effects of teh internal control audit
function: agency theory versus other explanator variables”, International Journal of
Auditing, Vol. 15 No. 1, pp. 1-20.
Sarens, G., De Beelde, I. and Everaert, P. (2009), “Internal audit: a comfort provider to the audit
committee”, The British Accounting Review, Vol. 41 No. 2, pp. 90-106.
Scannell, K. (2006), “Cox puts more tech into SEC”, The Wall Street Journal, 22 March, p. C1.
Scapens, R.W. (1985), Management Accounting: A Review of Recent Developments, Macmillan
Press Ltd, London.
Seetharaman, A., Gul, F.A. and Lynn, S. (2002), “Litigation risk and audit fees: evidence from UK
firms listed on US markets”, Journal of Accounting and Economics, Vol. 33 No. 1, pp. 91-115.
Shan, G.Y. (2013), “Can internal governance mechanisms prevent asset appropriation?
Examination of type I tunneling in China”, Corporate Governance: An International
Review, Vol. 21 No. 3, pp. 225-241.
Shan, G.Y. and Round, D. (2012), “’China’s corporate governance: emerging issues and problems”,
Modern Asian Studies, Vol. 46 No. 5, pp. 1316-1344.
IJMF Shan, G.Y. and Troshani, I. (2014), “Does XBRL benefit financial statement auditing?”, Journal of
Computer Information Systems, Vol. 54 No. 4, pp. 11-21.
12,2
Shan, Y.G. (2014), “The impact of internal governance mechanisms on audit quality: a study of
large listed companies in China”, International Journal of Accounting, Auditing and
Performance Evaluation, Vol. 10 No. 1, pp. 68-90.
Shan, Y.G., Troshani, I. and Richardson, G. (2015), “An empirical comparison of the effect of
134 XBRL on audit fees in the US and Japan”, Journal of Contemporary Accounting &
Economics, Vol. 11 No. 2, pp. 89-103.
Simunic, D.A. (1980), “The pricing of audit services: theory and evidence”, Journal of Accounting
Research, Vol. 18 No. 1, pp. 161-190.
Smith, C.W. and Warner, J.B. (1979), “On financial contracting: an analysis of bond covenants”,
Journal of Financial Economics, Vol. 7 No. 2, pp. 159-172.
Soderstrom, N.S. and Sun, K.J. (2007), “IFRS adoption and accounting quality: a review”,
European Accounting Review, Vol. 16 No. 4, pp. 675-702.
Srivastava, R.P. and Kogan, A. (2010), “Assurance on XBRL instance document: a conceptual
framework of assertions”, International Journal of Accounting Information Systems, Vol. 11
No. 3, pp. 261-273.
Street, D.L. and Bryant, S.M. (2000), “Disclosure level and compliance with IASs: a comparison of
companies with and without US listing and filings”, The International Journal of
Accounting, Vol. 35 No. 3, pp. 305-329.
Troshani, I. and Doolin, B. (2007), “Innovation diffusion: a stakeholder and social network view”,
European Journal of Innovation Management, Vol. 10 No. 2, pp. 176-200.
Troshani, I. and Lymer, A. (2010), “Translation in XBRL standardization”, Information
Technology & People, Vol. 23 No. 2, pp. 136-164.
Troshani, I. and Lymer, A. (2011), “Institutionalizing XBRL in the UK: an organizing vision
perspective”, Proceedings of the 19th European Conference on Information Systems
(ECIS2011), School of Economics, Aalto University, Helsinki, 9-11 June.
Troshani, I. and Rao, S. (2007), “Drivers and inhibitors to XBRL adoption: a qualitative approach
to build a theory in under-researched areas”, International Journal of E-Business Research,
Vol. 3 No. 4, pp. 98-111.
Troshani, I., Parker, L.D. and Lymer, A. (2015), “Institutionalising XBRL for financial
reporting: resorting to regulation”, Accounting and Business Research, Vol. 45 No. 2,
pp. 196-228.
Tyrrall, D., Woodward, D. and Rakhimbegova, A. (2007), “The relevance of international financial
reporting standards to a developing country: evidence from Khazakhstan”, International
Journal of Accounting, Vol. 42 No. 1, pp. 82-110.
Tysiac, K. (2013), “What accounting fraud risk factors will attract SEC’s attention?”, Journal of
Accountancy, Vol. 216 No. 6, pp. 1-4, available at: www.journalofaccountancy.com/News/
20139258
Vieru, M. and Schadewitz, H. (2010), “Impact of IFRS transition on audit and nonaudit fees:
evidence from small and medium-sized listed companies in Finland”, The Finnish Journal
of Business Economics, Vol. 1 No. 1, pp. 11-41.
Wallace, W.A. (1984), “Internal auditors can cut outside CPA costs”, Harvard Business Review,
Vol. 62 No. 2, pp. 16-20.
Wang, K., Sewon, O. and Iqbal, Z. (2009), “Audit pricing and auditor industry specialization in an
emerging market: evidence from China”, Journal of International Accounting, Auditing, and
Taxation, Vol. 18 No. 1, pp. 60-72.
Wang, T., Wen, C.Y. and Seng, J.L. (2014), “The association between the mandatory adoption of XBRL and
XBRL and the performance of listed state-owned enterprises and non-state-owned
enterprises in China”, Information & Management, Vol. 51 No. 3, pp. 336-346.
IFRS adoption
Watson, A., Shrives, P. and Marston, C. (2002), “Voluntary disclosure of accounting ratios in the
and audit fees
UK”, British Accounting Review, Vol. 34 No. 4, pp. 289-313.
XBRLChina (2004), “XBRL in listed companies: XBRL application of SSE”, XBRL, Shanghai,
available at: www.xbrl-cn.com/companies-news_en/20080917/20080917093909ur.shtml 135
(accessed 13 December 2013).
Xiao, J.Z., Yang, H. and Chow, C.W. (2004), “The determinants and characteristics of voluntary
internet-based disclosures by listed Chinese companies”, Journal of Accounting and Public
Policy, Vol. 23 No. 3, pp. 191-225.
Ye, H. and He, Y. (2008), “A continuous auditing model based on web-services”, 7the WSEAS
International Conference on Applied Computer & Applied Computational Science (ACACOS
’08), Hangzhou, pp. 406-411.
Zaman, M., Hudaib, M. and Haniffa, R. (2011), “Corporate governance quality, audit fees and non-
audit services fees”, Journal of Business Finance and Accounting, Vol. 38 Nos 1/2,
pp. 165-197.
Zion, D.A., Varshney, A. and Cornett, C. (2008), “XBRL: coming soon to a computer near you”,
Credit Suisse: Equity Research Accounting & Tax, New York, NY, available at: http://
unstats.un.org/unsd/nationalaccount/workshops/2008/newyork/IG24.PDF (accessed 6
December 2013).
Corresponding author
Yuan George Shan can be contacted at: [email protected]
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: [email protected]
Reproduced with permission of copyright owner. Further
reproduction prohibited without permission.