Mohammed Alshetwi
In 2017, each Saudi nonfinancial listed firm was required to prepare their reports consistent with International Financial Reporting Standards (IFRS). The current study examined whether the application of IFRS is associated with higher Financial Reporting Quality (FRQ). Based on a sample of 465 nonfinancial listed firms, the current study finds that IFRS adoption is not significantly related to enhanced FRQ. The study suggests that cost considerations might be an important factor contributing to inappropriate application of IFRS and, in turn, reduce the quality of FRQ. Moreover, the incentive of management and enforcement mechanisms might have had a combined effect leading to a ‘symbolic’ application of IFRS. Taking into consideration the situational context of emerging institutions, this study adds insights into global accounting research on the impact of IFRS on FRQ, supporting the view that the relationship between IFRS and FRQ may be confounded by other institutional factors such as cost considerations, enforcement mechanisms, and the development of distinctive legal and accounting systems.