The Development of Financial Reporting and Auditing Standards throughout the World: Importance of Institutions
We have studied factors that promote the development of financial reporting and auditing standards worldwide and in Georgia. More specifically, similarly to W. Gao’s and F. Zhu’s approach, we have examined the importance of institutional factors in the development of countries’ financial reporting and auditing standards. Our tests indicated that the institutional variables are crucial to the development of the financial reporting and auditing standards. Namely, the most important factor in the development of financial reporting and auditing standards proved to be the protection of minority shareholders’ interest, which also played an important role in the development of securities exchanges. Furthermore, we concluded that the soundness of banks was of medium level importance in the development of financial reporting and auditing standards. We have also found that countries’ educational system, more specifically the relationship between educational institutions and private sector, were crucial in the above-mentioned development process.
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