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Consensus of Auditors’ Decisions in the IFRS Era: Evidence from Korea

IFRS has been criticized in that it allows diverse interpretations, so it is necessary to examine whether auditors make similar decisions when confronted with ambiguous accounting transactions. To this end, this study investigates the effects of the transaction type on the auditors’ consensus under IFRS. This paper used two types of accounting decisions: decision by numeric (quantitative) conditions (lease classification decision by the given lease term, such as 8 years) and decision by verbal (qualitative) conditions (impairment loss recognition by the probability of the loss). We conduct a field experiment with Korean auditors. The results suggest that under IFRS the consensus of auditors’ decisions may not be reached in some types of transaction - especially in numerically-conditioned transactions. Therefore, it is needed to improve auditors’ consensus by using group decision making (e.g., interacting discussion) and decision aids (e.g., providing counter-explanations).