Do auditors perceive that there exists earnings management in goodwill accounting under IFRS?: Finnish evidence

Purpose – The purpose of this paper is to explore auditors' perceptions of goodwill accounting under international financial reporting standards (IFRS). More specifically, the authors surveyed auditors to see if they believe that IFRS enables earnings management in goodwill accounting. Further the paper explores background factors behind opinions. Design/methodology/approach – The study uses a survey of KHT certified Finnish auditors. The electronic questionnaire was sent to 523 KHT-auditors. The authors received 123 responses yielding a response rate of 23.5 percent. Findings – The survey indicates that there are two lines of thought regarding goodwill accounting under IFRS. According to the first line of thought, managers of listed Finnish companies behave opportunistically in goodwill write-off decisions. The other line of thought suggests that there is a favorable attitude towards the IFRS procedures of goodwill accounting. Big Four auditors seem to favor goodwill accounting under IFRS. Research limitations/implications – This study is conducted in Finland. Larger data collection would enhance the reliability of the results. Originality/value – This study contributes to the literature by providing the perspective of auditors on fair value and goodwill as very few studies have examined goodwill issues from this viewpoint.