The Impact of Cultural Dimensions on the Effectiveness and Strength of Auditing and Reporting Standards
DOI:
https://doi.org/10.60154/jaepp.2025.v26n2p138Keywords:
Strength of auditing and reporting standards, national culture, future temporal reference, Hofstede's cultural dimensionsAbstract
This study aimed to identify national cultural dimensions that may influence the strength of auditing and reporting standards (SARS) in 142 countries between 2015 and 2017. The study used the linear regression method to examine the impact of these dimensions on SARS, based on 257 country-year observations. The study used Hofstede's five cultural dimensions, including power distance (PDI), individualism (INDIV), uncertainty avoidance (UA), and masculinity (MAS), and the cultural dimension of the future temporal reference (FTR). The results showed that FTR, MAS, and UA positively and significantly impact SARS, suggesting that countries with weaker future temporal reference have stronger auditing and reporting standards. High masculinity, reflected in the professional practices of auditors and accountants, could ensure strong auditing and reporting standards, while high uncertainty avoidance could foster an environment conducive to stronger standards. In contrast, individualism and power distance had no significant impact on SARS. The study's originality lies in its analysis of the relationship between national culture and SARS, enriching the accounting and auditing field by providing a relevant perspective to detect the national culture dimensions underlying financial information quality. The implications of this research could be useful for policymakers and stakeholders' decision-making, indicating that countries with weaker FTR, high masculinity, or high uncertainty avoidance have stronger auditing and reporting standards and good quality financial information. Regulatory agencies could also benefit from broadening monitoring mechanisms for countries with harder FTR to minimize the negative effects of these national cultural dimensions on SARS.
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