1
PH.D Student of Accounting Shahid Chamran University
2
Teacher of Accounting Payame Noor University
Abstract
Recent research documents showed that common law countries have stronger investor protection laws and more developed financial markets than civil law countries. This line of inquiry is extended in our study to examine if variations in legal systems affect accounting and auditing. For a sample of 31 countries by Francis, Khurana and Pereira (2001) and La Porta (1997, 1998, 1999, 2000) and other researchers, it document that national accounting standards are more timely (accrual-based) and transparent in common law countries, which is consistent with a greater role played by the public disclosure of accrual-based accounting information in corporate governance in these countries. There is also greater demand for auditing as an enforcement mechanism when accounting is more timely and transparent. We also examine if causality could run from high-quality accounting and auditing to the development of financial markets. Also conjecture that high-quality accounting could mitigate the negative effect of weak investor protection on the development of financial markets. Specifically, we examine if those civil law countries that have more timely and transparent accounting, and more auditing, also have more developed financial markets relative to other civil law countries. We find little support that this is the case, which raises questions about the rationale for the international harmonization of accounting and the work of the International Accounting Standards Committee, absent fundamental changes in investor protection laws of civil law countries.
Noshadi, M. and Hajizadeh, G. (2015). Investor Protection Laws, Accounting, Auditing and Development of Financial Markets around the World. New Researches on Accounting, 1(1), 73-82.
MLA
Noshadi, M. , and Hajizadeh, G. . "Investor Protection Laws, Accounting, Auditing and Development of Financial Markets around the World", New Researches on Accounting, 1, 1, 2015, 73-82.
HARVARD
Noshadi, M., Hajizadeh, G. (2015). 'Investor Protection Laws, Accounting, Auditing and Development of Financial Markets around the World', New Researches on Accounting, 1(1), pp. 73-82.
CHICAGO
M. Noshadi and G. Hajizadeh, "Investor Protection Laws, Accounting, Auditing and Development of Financial Markets around the World," New Researches on Accounting, 1 1 (2015): 73-82,
VANCOUVER
Noshadi, M., Hajizadeh, G. Investor Protection Laws, Accounting, Auditing and Development of Financial Markets around the World. New Researches on Accounting, 2015; 1(1): 73-82.