Title: Does mandatory IFRS convergence constrain rounding manipulations in accounting? Evidence from Chinese firms

Authors: Li Dang; Daoping (Steven) He; Yuefan Sun

Addresses: Accounting Area, Orfalea College of Business, California Polytechnic State University, 1 Grand Avenue, San Luis Obispo, CA 93407, USA ' Accounting and Finance Department, Lucas College and Graduate School of Business, San Jose State University, One Washington Square, BT850, San Jose, CA 95192, USA ' Department of Accounting, College of Business, Beijing Technology and Business University, 33 Fucheng Road, Haidian District, Beijing 100048, China

Abstract: This study has two objectives: (1) to extend existing rounding phenomenon literatures on reported earnings and revenues to Chinese public firms and (2) to examine whether mandatory IFRS convergence in China constrains such rounding manipulations. We analyse interim earnings and revenue numbers over the period of 1990-2011. These reported accounting numbers show an unusual reporting pattern, which suggests that Chinese firms round up earnings and revenues. We then compare rounding manipulations in earnings and revenues before and after IFRS convergence. We find that profit firms round up their earnings more often and that loss firms round up their revenues more often after the mandatory IFRS convergence. Such a result may suggest that converging to IFRS does not discourage rounding manipulations.

Keywords: accounting quality; Benford's law; China; IFRS; rounding manipulations.

DOI: 10.1504/IJMFA.2017.084041

International Journal of Managerial and Financial Accounting, 2017 Vol.9 No.1, pp.1 - 18

Received: 25 Apr 2016
Accepted: 29 Nov 2016
Published online: 08 May 2017 *

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