The Mediating Role of Audit Quality in the Relationship Between IFRS Adoption and Financial Reporting: Evidence from Big Four Auditing Firms in an Emerging Market

This paper set out to investigate how the Big Four auditing firms in Saudi Arabia perceive the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting practices, addressing ongoing debate in the literature regarding whether IFRS adoption consistently enhances reporting practices across different institutional contexts. Further, the study investigates whether audit quality (AQ) mediates the relationship between IFRS adoption and financial reporting quality (FRQ). To address these questions, a structured questionnaire was circulated among auditors and quality assurance auditors working in the Saudi branches of the Big Four. Responses were examined using partial least squares (PLS) analysis. The results showed that IFRS has a clear positive effect on the qualitative characteristics of financial reporting, aligning with evidence from earlier studies. The results also underscored the mediating role played by AQ in reinforcing the benefits of IFRS on reporting practices. The findings carry significant ramifications, specifically for major stakeholders, including regulatory authorities, financiers, board members, senior executives, and investors.