Accounting Across Borders : Empirical Insights into the Research-Practice Gap and Audit Transparency

This dissertation explores the cross-country relationship between research and practice in accounting and examines the implications of international audit transparency, an area of accounting particularly relevant to both academic research and professional practice. Part A investigates the extent of a topic-based detachment in the accounting literature by applying an unsupervised machine learning technique to six research, practice, and bridging journals from the U.S. and Europe. We find a statistically significant divide between academia and practice, and that the research-practice gap is more pronounced in the U.S. than in Europe. This study provides novel evidence on an often discussed but rarely quantified gap between research and practice. To our knowledge, it is the first to use a rigorous machine learning algorithm to empirically examine the research-practice gap in accounting. Our results underscore the importance of divergences in institutional environments and enable more nuanced discussions about reasons for and better ways to narrow the research-practice divide globally. Part B examines how institutional environments affect KAM reporting in Europe, where uniform KAM disclosure requirements combine with broad institutional diversity. We use principal component analysis to condense various individual economic, regulatory, audit market-related, and sociological country attributes into meaningful country factors and assess their influence on KAM disclosure. Our results show that the country-specific environment significantly impacts KAM reporting. At the same time, the importance of our country factors varies, and they possess diverging associations with different aspects of KAM disclosure. Our findings contribute comprehensive cross-country evidence on the determinants of KAMs to regulators and inform financial statement users about the institutional context of KAMs. Part C analyzes whether audit partner and audit firm rotations are associated with a “fresh look” at the audit, reflected in changes in KAM disclosure. This study examines a broad European sample as a unique setting with simultaneous internal and external auditor rotation regulations. The results document that audit firm rotations significantly influence various aspects of KAM novelty, while the impact of audit partner rotations is limited. The comprehensive analysis contributes to the longstanding debate in research and practice surrounding internal and external auditor rotation requirements and provides evidence in favor of audit firm rotational regulations to regulators worldwide.