Analyzing the external auditor’s perception of the impact of IFRS 15 on the profitability and performance of emerging market companies

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Revenue recognition is a very complex area due to user interest in this metric and can even lead to errors and fraud in its understanding. The difficulties of revenue recognition are well known to practitioners because, even if the principles and standards are stable, economic conditions may require new experiences, adaptive knowledge, and flexibility. Therefore, thinking about how to apply the new IFRS 15 standard is more important than ever as the transition to the new standard takes place. In this context, this study aims to evaluate the way external auditors understand how implementing IFRS 15 will probably affect business performance and profitability, and to identify the main problems and obstacles that could come up during that process. In this sense, a quantitative study was conducted using a survey of auditors working for Big Four companies during 2021–2022. To address these problematic aspects of revenue disclosure under the standard, the study’s findings look into how external auditors perceive the complexity of IFRS 15, the openness of their professional judgment, and the anticipated advantages of engagement activities. In addition, the literature review identified business sectors that demonstrated a significant impact on revenue recognition as a result of the implementation of IFRS 15.

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    • Figure 1. Share of respondents who assessed the implementation of IFRS 15 in practice in audit missions taking into account the industry of entities
    • Figure 2. Presentation of the level of interpretation and uncertainty of IFRS 15 in the vision of auditors
    • Figure 3. Presentation of the level of discretion and manipulation of income through IFRS 15
    • Figure 4. Disclosure of the level of internal control over revenue recognized based on IFRS 15
    • Table 1. Structure of the opinion surv
    • Conceptualization
      Cristina Gabriela Cosmulese, Veronica Grosu, Artur Zhavoronok
    • Formal Analysis
      Cristina Gabriela Cosmulese, Veronica Grosu, Artur Zhavoronok
    • Investigation
      Cristina Gabriela Cosmulese, Veronica Grosu
    • Methodology
      Cristina Gabriela Cosmulese, Veronica Grosu
    • Project administration
      Cristina Gabriela Cosmulese
    • Resources
      Cristina Gabriela Cosmulese, Veronica Grosu, Artur Zhavoronok
    • Supervision
      Cristina Gabriela Cosmulese, Veronica Grosu
    • Validation
      Cristina Gabriela Cosmulese
    • Writing – original draft
      Cristina Gabriela Cosmulese, Veronica Grosu
    • Writing – review & editing
      Cristina Gabriela Cosmulese, Artur Zhavoronok
    • Data curation
      Veronica Grosu
    • Visualization
      Artur Zhavoronok