IFRS Adoption Effects On The Financial Sector Of Ghana

This study examined the effect of International Financial Reporting Standard(IFRS)adoption on financial reporting quality(earnings management)and audit quality(audit fees and audit report timeliness)in the financial institutions in Ghana.It also explored the relation between the reporting quality and audit fees.A panel regression model is used to determine the effect of the IFRS adoption on reporting quality as well as audit fees.The data used was drawn from the audited annual report of 23 universal banks and 28 insurance companies observed over the period 2005 to 2016.The empirical result indicates that financial institutions exhibit less earnings management after IFRS adoption.It also finds that higher fees are paid after the transition to the new accounting standard.Furthermore,the study finds a statistically significant negative relationship between measures of reporting quality and level of audit fees.Overall,the study result indicates that the adoption and implementation of IFRS has brought about an improvement in the quality of financial reporting among financial institutions in Ghana.However,it implementation has been accompanied with high audit fees.The result shows an increase in ARL after IFRS mandate with a pooled mean of 109 days.However,there was no significant difference between ARL pre and post IFRS mandate.This implies that the mandatory adoption of IFRS has no significant influence on ARL.On CG mechanisms,the results indicate that board size has a negative relationship with ARL,board independence has positive relationship with ARL while ownership structure has insignificant relationships with ARL.This implies that on average CG mechanism have instantaneous influence on ARL except board independence which has a further increasing effect on ARL in the subsequent year.The results documented in this study add to the dearth of literature on IFRS adoption and earnings management among financial institutions from the perspective of an emerging market.The results of this study contribute additional evidence to the few literatures on the impact of IFRS adoption on financial sector and more especially the insurance industry which has been ignored by most researchers.This is one of the few studies that directly examine the cost of implementing IFRS with a focus on audit fees.The study therefore contributes to the debate on IFRS adoption and financial reporting quality and its relation with audit fees.This study evaluates the influence of mandatory adoption of IFRS and corporate governance(CG)mechanisms such as board size,board independence and ownership structure on audit report lag(ARL).Insights from this study should inform policymakers such as SEC-Ghana and GSE,whose prior policies have focused on driving a more independent board amongst listed firms,on the effect of the possible delay in the release of audited annual report which is triggered by such policies.