Examining the Impact of International Financial Reporting Standards Adoption on Financial Reporting Quality of Multinational Companies

Abstract

This research delves into the influence of adopting international financial reporting standards (IFRSs) on the financial reporting quality (FRQ) of Indian multinational corporations (MNCs). It also investigates the moderating impact of the internal control system (ICS) on the relationship between IFRSs and FRQ. The data collection involves a survey using a previously validated and adjusted scale from earlier studies. A sample of 512 participants is selected through purposive sampling methods. The analysis employs partial least square structural equation modelling (PLS-SEM) to validate the data and test the hypotheses. The results indicate a significantly positive influence of perceived benefits, perceived ease of implementation, and government policy on IFRS adoption within Indian MNCs. However, the impact of legal requirements on IFRS adoption in Indian MNCs is insignificantly positive. Furthermore, adopting IFRSs substantially positively affects FRQ within Indian MNCs. Similarly, FRQ significantly positively affects the relevance, accuracy, understandability, comparability, and timeliness of MNCs’ financial reports in India. The moderating role of the ICS in the connections between IFRS adoption and FRQ is positive yet insignificant within Indian MNCs. The insights derived from this study are valuable for investors, shareholders, government authorities, financiers, board members, and top executives of organisations.

1. Introduction

Financial reporting plays a crucial role in capital allocation, providing investors and various stakeholders with accurate and dependable insights into a particular company’s financial performance and standing. Nevertheless, the utilisation of national accounting standards in the past has resulted in inconsistencies in the manner in which financial statements are presented, thereby introducing complexities that hinder the comparability of financial data across different countries and jurisdictions (Almaqtari et al. 2021; Pushparaj and Kushwaha 2023). In response to this issue, the international business community has embraced the IFRS as a unified framework designed to standardise accounting practices among MNCs worldwide, aiming to mitigate such discrepancies. Consequently, as a growing number of multinational entities opt to adopt IFRSs, there has been a surge in discussions and analyses regarding the effects of this transition on the FRQ of MNCs. This topic continues to attract considerable attention and remains the subject of ongoing discourse (Amin et al. 2023; Babu and Kushwaha 2024).

High-quality financial reporting plays a crucial role in nurturing investor confidence by providing accurate and dependable information regarding a company’s financial well-being. When the influence of IFRSs on the financial reporting of MNCs is not clearly understood, it can introduce a sense of ambiguity among investors tasked with making informed investment choices (Pizzi et al. 2022; Vitolla et al. 2020a). One of the primary aims of IFRSs is to elevate the level of comparability present in financial statements across various jurisdictions. Nevertheless, the complexities associated with implementing and interpreting IFRSs may result in discrepancies within financial reporting methodologies (Correa-Garcia et al. 2020; Pizzi et al. 2021). Consequently, this poses a challenge for investors and other interested parties when attempting to draw comparisons regarding the financial performance of MNCs that are operational across diverse nations. The efficacy of IFRS adoption is heavily contingent on the uniformity in regulatory frameworks and enforcement mechanisms across different countries. Disparities in enforcement practices can potentially erode the envisioned advantages of IFRSs (Mosteanu and Faccia 2020; Sisaye 2021).

The literature suggests a positive correlation between IFRS adoption and improved FRQ (De Villiers and Sharma 2020). A significant body of research suggests that IFRS adoption can enhance FRQ for MNCs. IFRSs promote a single set of accounting standards, enabling a more straightforward comparison of financial statements across MNCs operating in different countries (Araya 2022; Turgunovna and Abrorovna 2022). This enhances transparency and facilitates informed decision making by investors and analysts. Previous research suggests adopting IFRSs leads to more value-relevant financial information in MNC statements (Vitolla et al. 2020a). This implies a decrease in the potential for earnings management and a more accurate picture of a company’s financial health. Studies also found that by providing a standardised reporting framework, IFRSs can make MNCs in developing countries more attractive to foreign investors seeking reliable financial information (Arvidsson and Dumay 2022; Kliestik et al. 2021).

The effect of IFRS adoption on the FRQ of MNCs is a well-researched topic, but there are still gaps to explore (La Torre et al. 2020; Yusran 2023). Most studies have found that the effectiveness of IFRS adoption depends on enforcement and implementation. Further, existing research often focuses on developed economies (Adams and Abhayawansa 2022; Hope et al. 2020). However, the impact of IFRS adoption on reporting quality in developing economies is missing. The influence of the internal control system (ICS) is missing in the literature; however, the ICS can influence reporting quality within MNCs and affect the effectiveness of IFRS adoption (Ashraf et al. 2020; Lashitew 2021). The impact of IFRSs might differ across industries; therefore, studying specific industries is required to investigate the impact of adopting IFRSs on the FRQ of MNCs in India. By addressing these research gaps, this study can contribute new insights to understanding IFRS adoption’s impact on FRQ in MNCs (Doni et al. 2020).

To address the above research gaps, this research aims to investigate the impact of IFRS adoption on the FRQ of multinational companies in the Indian context. It also examines how IFRS adoption influences financial statements’ relevancy, comparability, timeliness, understandability, and reliability. Further, it examines factors such as perceived benefits, perceived ease of implementation, legal requirements, and government policy influencing the adoption of IFRSs in MNCs of India. It also analyses the moderating role of the ICS in the relationship between IFRS adoption and FRQ in India. By achieving these objectives, the research will provide valuable insights into the effectiveness of IFRSs in improving FRQ for multinational companies operating in India. The outcome will also highlight the importance of a robust ICS in ensuring the successful implementation of IFRSs and enhancing the overall reliability of financial reporting.

2. Literature Reviews

2.1. International Financial Reporting Standards (IFRSs)

The International Accounting Standards Board (IASB) established the IFRS to ensure consistency, transparency, and comparability in financial statements on a global scale. The primary aim of IFRSs is to present a clear overview of a company’s financial status and performance to investors and other users of financial reports, irrespective of the company’s location. This facilitates the comparison of companies across countries and simplifies cross-border investment decisions (Amiri et al. 2024; Yusran 2023).

MNCs struggle to communicate their financial status to an international audience effectively. To tackle this issue, numerous countries have embraced IFRSs (Abed et al. 2022; Kliestik et al. 2021). IFRSs serve as a universal language for financial reporting, enabling investors and analysts to evaluate the performance of MNCs operating in different nations. This transparency is crucial for making well-informed investment choices and fostering fair competition among global MNCs. Nevertheless, the adoption of IFRSs has faced criticism. Some argue that applying a single set of standards can be challenging due to discrepancies in national accounting practices and economic conditions (Kushwaha et al. 2024; Turzo et al. 2022). Moreover, the expenses associated with implementing and adhering to IFRSs can be substantial for MNCs. Despite these obstacles, IFRSs continue to dominate international financial reporting, representing a significant advancement towards financial comparability worldwide (Khan et al. 2021; Mardessi 2022).

2.2. IFRS Adoption

The implementation of IFRSs has been a gradual procedure. Although IFRSs are prevalent, they are not universally embraced. The European Union became a significant early adopter by requiring IFRSs for publicly traded companies in 2005 (Alruwaili et al. 2023; Vitolla et al. 2020b). Numerous other nations have since followed this path, recognising the advantages of the coherence and openness that IFRSs introduce to financial reporting. Nevertheless, certain significant economies, such as the United States, adhere to their own established accounting principles (Hsu and Yang 2022). The discourse concerning full IFRS adoption persists, with some nations choosing convergence, a process where their domestic standards are progressively aligned with IFRSs. This continuous evolution mirrors the aspiration to establish a universal financial reporting framework while acknowledging the obstacles to executing a complete transition for established economies. The adoption of IFRSs by MNCs is a burgeoning tendency encouraged by the aspiration for worldwide transparency and cost efficiency (De Villiers and Sharma 2020; Zahid and Simga-Mugan 2024). IFRSs establish a standardised accounting terminology streamlining the consolidation procedure for MNCs operating in various countries (Anssari and Al-Tamimi 2023). This eliminates the necessity to compile distinct financial statements according to diverse local regulations, thereby conserving time and resources. Nonetheless, adopting IFRSs can be intricate, necessitating staff training and potentially resulting in modifications to disclosed financial performance owing to disparities in accounting principles. Despite these challenges, the advantages of enhanced comparability and heightened global investor trust frequently outweigh the initial expenses for MNCs seeking to broaden their international presence (Araya 2022; Tawiah and Gyapong 2023).

Several studies indicate a favourable association between perceived advantages and IFRS adoption. Works such as Ramanna and Sletten (2014) underscore the perceived benefits for nations, encompassing elevated foreign direct investment (FDI) due to enhanced financial reporting credibility and the prospective cost savings from evading the formulation of distinct national standards (Hosiyatovich et al. 2023). Furthermore, advocates like Sunder (2010) underscore the perceived benefits for investors, including access to more pertinent data for decision making and the capacity to compare companies globally with greater convenience. This increased transparency is viewed as cultivating trust and enhancing the general efficiency of worldwide capital markets. Nevertheless, the narrative is not exclusively one-sided (Beshimovna et al. 2024). Critics like Nobes (2008) contend that a standardised approach may not be appropriate for all economies, particularly those with distinct accounting customs. The implementation costs can be substantial, particularly for smaller enterprises, and the convergence process can be intricate and time-intensive. Moreover, cultural and legal disparities among nations can generate complexities in deciphering and implementing IFRSs consistently (Ahmad et al. 2024; Turgunovna and Abrorovna 2022). Despite these challenges, the perceived advantages of IFRS adoption persist as a potent motivator. Empirical investigations like Bose et al. (2017) have uncovered a positive association between IFRS adoption and enhanced FRQ. This implies that the perceived benefits can translate into tangible enhancements for stakeholders. The persistent controversy surrounding IFRS adoption mirrors the tension between the aspiration for a standardised global financial reporting framework and the necessity to consider the specific circumstances of individual nations (Pizzi et al. 2021; Wiharno et al. 2023). In line with the above arguments, the following hypothesis is proposed:

H1a: 

Perceived benefits positively impact IFRS adoption.

User-friendliness is crucial for easing the shift towards IFRSs (Harymawan et al. 2023). Nations with well-established and robust accounting systems are more likely to experience a smoother transition to IFRSs, as Sebrina et al. (2023) demonstrated. Conversely, countries with less developed accounting frameworks may encounter more significant obstacles in implementing IFRSs due to a lack of familiarity and potentially inadequate training resources (Correa-Garcia et al. 2020; Posadas et al. 2023). Additional investigations by Nobes (2013) explore the psychological dimension, proposing that decisionmakers are inclined towards embracing standards perceived as comprehensible and easy to implement. This assertion aligns with the widely recognised technology acceptance model (TAM), which emphasises the perceived ease of use as a critical driver of user acceptance (Sebrina et al. 2023; Sisaye 2021). Nevertheless, it is essential to acknowledge the intricacy of the IFRS itself. Even in nations with well-established accounting procedures, transitioning to new accounting principles necessitates substantial effort and investments in training and infrastructure. Overall, the perceived ease of implementation emerges as a significant influencer of IFRS adoption (Kausar and Park 2024). While certain countries may leverage their existing accounting frameworks to facilitate a seamless transition, the inherent complexity of IFRSs mandates continuous efforts to tackle implementation hurdles and ensure user comprehension (Kateb 2024; Mosteanu and Faccia 2020). In line with the above arguments, the following hypothesis is proposed:

H1b: 

Perceived ease of implementation positively impacts IFRS adoption.

The influence of regulatory obligations on implementing IFRSs presents a multifaceted scenario in scholarly literature. Advocates such as Seufert et al. (2012) posit that compulsory adoption mandated by laws establishes a definitive and enforceable structure, promoting quicker and more extensive integration (Eshonqulov 2024; Pizzi et al. 2022). This statutory directive can be particularly impactful in nations with inadequate enforcement mechanisms for accounting regulations, as it establishes a more robust basis for ensuring uniform and transparent financial disclosures. Research by Daske et al. (2008) indicates that regulatory requirements, in conjunction with a robust institutional setting that fosters openness, can result in notable advantages in capital markets stemming from adopting IFRSs. Nonetheless, detractors like Pizzi et al. (2022) underscore potential limitations. Legal mandates may lack adaptability and disregard the unique requirements of various sectors or sizes of businesses. This standardised approach might hinder creativity and inhibit the evolution of local accounting methodologies. Furthermore, legal enforcement could demand substantial resources, and the efficacy of regulatory obligations often relies on the potency of a nation’s existing legal and regulatory structure (Alshamsi and Ahmad 2024; Kateb 2024). On the whole, the correlation between regulatory obligations and the adoption of IFRSs seems intricate. While compulsory adoption could expedite the procedure and lay a robust groundwork for enforcement, it is imperative to consider each nation’s particular circumstances and guarantee that legal frameworks are sufficiently flexible to accommodate diverse demands (Tlemsani et al. 2024). In line with the above arguments, the following hypothesis is proposed:

H1c: 

Legal requirements positively impact IFRS adoption.

Studies such as Daske et al. (2008) illustrate that a robust governmental commitment to implementing IFRSs results in a more seamless and successful adoption process. This dedication can be demonstrated through various means, including establishing clear and comprehensive laws that align with IFRS principles, allocating resources for training accountants and businesses, and creating robust enforcement mechanisms to ensure adherence (Chen et al. 2024; Kausar and Park 2024). Moreover, findings by Ball et al. (2012) propose that governmental policies emphasising the potential advantages of IFRSs, such as enhanced access to capital markets and increased investor trust, can promote broader acceptance among enterprises (Parrondo and Amat 2024). Nevertheless, the efficacy of governmental policy is not immune to constraints. Factors like the existing accounting landscape in a nation and the level of political stability can impact the efficacy of endeavours to adopt IFRSs. Chi et al. (2022) underscore that countries with well-established legal and institutional structures are better equipped to handle the intricacies of IFRS implementation. Furthermore, political dedication may fluctuate, introducing potential uncertainty and impeding sustained advancements (Sebrina et al. 2023; Senan 2024). Despite these challenges, governmental policy remains a pivotal force in the worldwide propagation of IFRSs. Through fostering a conducive atmosphere and advocating for the perceived advantages, governments hold substantial sway over a nation’s readiness and capacity to embrace these global financial reporting standards (Thakur and Kushwaha 2024). In line with the above arguments, the following hypothesis is proposed:

H1d: 

Government policy positively impacts IFRS adoption.

Studies conducted by Barth et al. (2013) propose that the implementation of IFRSs results in heightened transparency and comparability within financial statements, thus diminishing information asymmetry and bolstering investor trust (Kushwaha et al. 2024; Posadas et al. 2023). This assertion corresponds with the discoveries made by Leuz (2010), who noted a decline in manipulative earnings practices after adopting IFRSs, indicating a prospective enhancement in the dependability of disclosed financial data. Moreover, investigations by Ball et al. (2012) indicate that adopting IFRSs could potentially lead to a decrease in the cost of capital, as investors perceive companies adhering to IFRS guidelines as less risky (Amiri et al. 2024; Harymawan et al. 2023). Nevertheless, the narrative surrounding this subject is multifaceted. Certain studies, such as those by Daske et al. (2013), have unveiled mixed outcomes, with a more noticeable positive influence on FRQ observed in developed nations with robust regulatory frameworks. Critics like Nobes (2008) also contend that the standardised nature of IFRSs may not be universally applicable, particularly in economies with distinct accounting customs or weaker enforcement mechanisms (Amin et al. 2023; Babu and Kushwaha 2024). The transition phase may pose intricate challenges and financial burdens, especially for smaller enterprises, potentially resulting in short-term decreases in FRQ as they acclimate to the novel regulations. Despite these obstacles, existing research indicates a favourable association between adopting IFRSs and FRQ. Empirical inquiries by Bose et al. (2017) have identified a positive relationship between implementing IFRSs and enhancing FRQ, implying that the perceived advantages can manifest as tangible enhancements for stakeholders. The ongoing discourse regarding adopting IFRSs mirrors the continual pursuit of equilibrium between establishing a universal financial reporting language and recognising the distinct circumstances of individual nations (Pushparaj and Kushwaha 2023; Shiva et al. 2023). In line with the above arguments, the following hypothesis is proposed:

H2: 

IFRS adoption positively impacts FRQ.

2.3. Financial Reporting Quality (FRQ)

The significance of financial reports lies at the core of FRQ. Research conducted by Ghosh (2011) underscores the significance of offering reliable and beneficial information for decision making among stakeholders (Ahmad et al. 2024; Kushwaha et al. 2021). These pertinent reports go beyond historical data, integrating forward-looking approximations and insights into a company’s future potential. This perspective is supported by Cheng et al. (2018), who identified a positive relationship between using value-relevant accounting data and enhancing investor decision making. Similarly, Watts (2003) proposes that relevance bolsters the efficiency of capital markets by enabling investors to evaluate risks and returns across different companies more effectively. Nevertheless, the attainment of relevance is not without its challenges. Factors such as subjectivity in predicting future cash flows and the potential for bias from management can pose hurdles (Kushwaha et al. 2021; Wiharno et al. 2023). Moreover, striking a balance between relevance and reliability can be intricate. While offering excessively optimistic forecasts may benefit decision making, it can also raise doubts regarding reliability. Nonetheless, the emphasis on relevance in frameworks like the IFRS underscores its critical function in ensuring top-notch financial reporting. Entities like the International Accounting Standards Board (IASB) continuously work towards refining disclosure requirements to boost the relevance of financial data for a wide array of stakeholders (Beshimovna et al. 2024; Kushwaha and Miah 2023). Furthermore, the concept of relevance is dynamic. Defining what constitutes pertinent information may also require adjustments as business models evolve and user requirements change. This dynamic nature necessitates continual research and enhancement of reporting standards to guarantee the provision of decision-useful information in a globalised and ever-evolving financial environment (Hosiyatovich et al. 2023; Kushwaha et al. 2022a). In line with the above arguments, the following hypothesis is proposed:

H3a: 

The impact of relevance on FRQ is positive.

The precision of financial reports stands as a fundamental element of FRQ. Studies like the one conducted by Dechow et al. (2011) emphasise the significance of providing a faithful representation, ensuring that the financial information reported accurately mirrors a company’s underlying economic performance (Anssari and Al-Tamimi 2023; Singh et al. 2021). This precision fosters trust among stakeholders, enabling them to make well-informed decisions based on a dependable portrayal of the company’s financial status. Similarly, Lobo et al. (2016) discovered a positive correlation between accounting conservatism, which prioritises accuracy over optimism, and a decrease in the cost of capital. This suggests that investors perceive companies with precise reporting as less risky (Kushwaha 2021; Tawiah and Gyapong 2023). Additionally, research by Ball and Shivakumar (2006) suggests that accurate financial reporting can enhance market efficiency, as investors can depend on the reported information to make efficient investment choices. However, achieving precision can pose challenges. Errors in measurement, accounting estimations, and the potential for fraudulent activities can create obstacles. Regulatory bodies and accounting standard-setters play a vital role in addressing these challenges. Frameworks such as the IFRS stress the importance of utilising accrual accounting and providing comprehensive disclosures to boost the precision of reported financial information (Kushwaha et al. 2022b). Nevertheless, the ongoing discussion regarding the equilibrium between relevance and reliability highlights the complexities of achieving absolute precision. While the pursuit of faithful representation remains crucial, striking a balance with providing decision-useful information is indispensable for top-quality financial reporting (Amiri et al. 2023; Kushwaha et al. 2023). In line with the above arguments, the following hypothesis is proposed:

H3b: 

The impact of accuracy on FRQ is positive.

The comprehensibility of financial statements plays a crucial role in FRQ. Research conducted by Libby and Brown (2013) underscores the significance of precise and transparent communication, asserting that individuals with varying levels of financial knowledge should be capable of comprehending the data presented (Almaqtari et al. 2021; Vitolla et al. 2020a). Accessible reports decrease information asymmetry, enabling stakeholders to make well-informed decisions without solely depending on expert interpretation. This is consistent with the discoveries of Dechow et al. (2011), who noted a positive relationship between the clarity of reports and the accuracy of analyst forecasts. Moreover, investigations by Ball et al. (2012) propose that quickly interpretable reports can result in a decreased cost of capital, as investors perceive them to be less risky and necessitate less effort to analyse. Nevertheless, attaining comprehensibility can pose challenges (Araya 2022; De Villiers and Sharma 2020). Intricate accounting regulations and utilising specialised terminology can establish obstacles for specific users. Scholars such as Pizzi et al. (2022) advocate for straightforward language disclosures and the adoption of user-friendly layouts like charts and graphs to tackle this issue. Additionally, frameworks like the IFRS underscore the significance of unambiguous and succinct communication, mandating companies to offer clarifications alongside intricate financial data (Pizzi et al. 2021; Turgunovna and Abrorovna 2022). Despite the obstacles, the emphasis on comprehensibility in FRQ frameworks highlights its crucial role in ensuring top-notch financial reporting. By rendering financial information accessible to a broader array of stakeholders, comprehensibility promotes transparency, facilitates well-informed decision making, and ultimately contributes to a more efficient and fair financial market (Correa-Garcia et al. 2020; Sisaye 2021). In line with the above arguments, the following hypothesis is proposed:

H3c: 

Comprehensibility positively influences FRQ.

Studies carried out by and Mosteanu and Faccia (2020) accentuate the importance of users being able to compare a firm’s performance over different periods and against its rivals. When financial reports are prepared using a uniform set of regulations, these comparisons are eased, reducing the likelihood of misinterpretation (Hsu and Yang 2022; Vitolla et al. 2020b). This aligns with the conclusions of Leisenring et al. (2012), who identified a positive correlation between the comparability of financial statements and the accuracy of analyst forecasts. Similarly, Barth et al. (2018) propose that enhanced comparability nurtures investor trust by lessening information asymmetry and enabling fairer competition for global firms. However, achieving comparability can present challenges. Disparities in accounting practices among nations and intricacies in implementing the same standards can result in discrepancies. Additionally, companies may possess distinct business models that necessitate specific accounting treatments, potentially impeding direct comparisons (Arvidsson and Dumay 2022; Kliestik et al. 2021). Nevertheless, frameworks like the IFRS stress the importance of uniform application of accounting principles to boost comparability. Despite the hurdles, research indicates a positive association between report comparability and FRQ (Alruwaili et al. 2023; Ashraf et al. 2020). The ability to promptly compare financial information empowers users to make more informed decisions and diminishes the likelihood of manipulation. The ongoing discourse surrounding IFRS convergence underscores the pursuit of a common language for financial reporting while acknowledging the necessity to address industry-specific nuances and ensure a balance between consistency and flexibility (Adams and Abhayawansa 2022; Hope et al. 2020). In line with the above arguments, the following hypothesis is proposed:

H3d: 

Comparability positively impacts FRQ.

Financial statement punctuality plays a significant role in the quality of financial reporting. Research conducted by Lobo and Zhou (2005) underscores the significance of delivering up-to-date information to stakeholders for decision making. Timely disclosures enable investors to respond to evolving circumstances and evaluate a firm’s financial condition based on the most recent data available (Hamad et al. 2020; Lashitew 2021). This is consistent with the discoveries made by Leisenring et al. (2012), who identified a positive link between timeliness and market effectiveness. Investors equipped with recent financial data can make better-informed investment choices, potentially resulting in a more effective allocation of resources. Moreover, prompt reporting can improve corporate governance by promoting increased stakeholder openness and answerability. Nevertheless, achieving timeliness can pose challenges (Doni et al. 2020; Mardessi 2022). Elaborate accounting procedures and regulatory demands may cause delays in the issuance of reports. Furthermore, the necessity of striking a balance between timeliness and precision can give rise to a trade-off. Hastening reports to meet deadlines could jeopardise their accuracy, potentially undermining FRQ (La Torre et al. 2020; Turzo et al. 2022). Nevertheless, advancements in technology and the growing emphasis on timeliness by regulators contribute to accelerated reporting cycles. Overall, the existing literature implies a positive relationship between the timeliness of financial reports and FRQ. Timely disclosures enhance decision making for investors, elevate market efficiency, and bolster corporate governance. Nonetheless, maintaining a balance between timeliness and precision is imperative for safeguarding the overall quality of financial reporting (Abed et al. 2022; Wang et al. 2020). In line with the above arguments, the following hypothesis is proposed:

H3e: 

Timeliness positively impacts FRQ.

2.4. Internal Control System (ICS)

The significance of institutional contextual factors (ICFs) in moderating the correlation between adopting IFRSs and FRQ has garnered considerable attention in recent academic literature. Chen et al. (2015) conducted studies emphasising that robust enforcement mechanisms by regulatory authorities can significantly amplify the favourable effects of IFRS adoption on FRQ (Craja et al. 2020). This is consistent with the discoveries of Francis et al. (2009), who noted that inadequate enforcement may result in discrepancies in the application of IFRSs, potentially diminishing its efficacy in enhancing FRQ. Moreover, investigations by Nobes (2013) propose that cultural elements can shape the understanding and execution of IFRSs. For instance, nations with well-established standard law practices may more readily adjust to IFRSs than civil law frameworks (O’Dwyer and Unerman 2020). These conclusions indicate that ICFs function as moderating factors, affecting the intensity of the association between IFRS adoption and FRQ. Robust enforcement mechanisms, a sophisticated legal and regulatory structure, and cultural harmony with IFRS principles all potentially bolster FRQ positively. Conversely, feeble enforcement, insufficient institutional frameworks, and cultural disparities can impede the effectiveness of IFRS implementation in advancing FRQ. This highlights the necessity of evaluating a country’s specific institutional context when assessing the possible advantages of IFRS adoption (Tsalis et al. 2020). In line with the above arguments, the following hypothesis is proposed:

H4: 

The ICS moderates the relationship between IFRS adoption and FRQ.

Figure 1 presents the conceptual framework of the study.

2.5. Indian Accounting Profession and Adoption of IFRSs in India

The Indian accounting profession is governed by the Institute of Chartered Accountants of India (ICAI), established in 1949. ICAI plays a crucial role in regulating accounting practices in India, including the development of accounting standards. In recent years, ICAI has been proactive in aligning Indian accounting standards with global practices, particularly IFRSs, to enhance the transparency, comparability, and reliability of financial statements.

India officially converged its accounting standards with IFRSs through the implementation of Indian Accounting Standards (Ind ASs) starting in 2016. These standards are largely based on IFRSs, with certain modifications to cater to the unique regulatory and economic environment of India. The adoption of Ind ASs is mandatory for Indian companies listed on stock exchanges and those with a net worth exceeding a specified threshold. This convergence represents a significant step toward global financial integration. It has been progressively adopted by a majority of Indian MNCs, thereby enhancing the quality of financial reporting and improving investor confidence. According to ReportYak (2024), it is reported that the Government of India and the Ministry of Corporate Affairs are currently engaged in efforts to align Indian standards with IFRSs. This initiative aims to enhance the attractiveness of Indian businesses to global investors. Nevertheless, not all Indian corporations are obligated to comply with IFRSs; the decision is contingent upon the valuation of the company. Furthermore, distinct regulations apply to entities that are either listed or unlisted on Indian stock exchanges.

3. Methods

This investigation employs a descriptive and cross-sectional framework to examine the impact of the implementation of IFRSs on the FRQ in Indian MNCs. A purposive sampling method is utilised in the research to ensure that participants possess specialised expertise and direct experience pertinent to the research investigation. The participants, including finance officers, chartered accountants, company secretaries, financial consultants, and auditors from Indian MNCs, are chosen based on their proficiency in financial reporting and familiarity with IFRSs, enabling them to offer valuable insights in response to the survey inquiries. The MNCs that are encompassed within the scope of this particular study were meticulously selected with careful consideration of the specific year in which they commenced their business operations in the Indian market. The rationale that underpins the decision to focus exclusively on MNCs that have been operational in India for a minimum duration of five years is primarily predicated upon their accumulated experience in navigating the complexities of the Indian business environment, coupled with the relative ease that such established entities experience in the implementation of IFRSs within the framework of the Indian accounting system. The study incorporates 517 participants, a sample size deemed sufficient for robust statistical analyses utilising partial least squares structural equation modelling (PLS-SEM). This sample size guarantees the reliability and validity of the outcomes, facilitating generalisation to the wider population of finance professionals in Indian MNCs. The determination to involve 517 participants is grounded on power analysis and the necessity to attain a statistically significant confidence level in the findings.

The data collection tool comprises a structured survey with 42 scale items thoughtfully chosen and adapted from established scales in prior research (please refer to Appendix A). These items are formulated to evaluate 11 variables associated with IFRS adoption, financial reporting quality, and the potential moderating impacts of internal control systems (ICSs). The survey queries are tailored to elicit the participants’ viewpoints and encounters with the IFRS, focusing on the influence of its adoption on various facets of financial reporting quality within their respective organisations. Prior to finalising the survey, a pilot study involving 57 participants was conducted to assess the reliability and clarity of the scale items. This preliminary study identified the necessity for slight adjustments to four scale items to enhance their comprehensibility for the target audience. The revised survey was subsequently employed for the ultimate data collection process, ensuring the instrument’s reliability and validity.

Data collection for the investigation occurred from November 2023 to March 2024. Throughout the duration, the self-administered survey was circulated to the chosen participants, affording them ample time for completion. The utilisation of a self-administered survey enabled respondents to furnish their responses in a comfortable and private environment, minimising potential biases and fostering candid and precise answers. The data collection procedure was meticulously strategised and implemented to ensure a high response rate and the quality of the acquired data. The informed consent of the participants was meticulously obtained through a comprehensive process that involves disseminating detailed information regarding the overarching objectives behind the collection of the specific data, as well as emphasising the utmost importance of maintaining the confidentiality and privacy of the sensitive information they are willingly sharing during this research endeavour. The response rate was 87% as the sample was selected meticulously. The collected data were analysed utilising SmartPLS 4.0 software, well-suited for executing partial least squares structural equation modelling (PLS-SEM). This statistical method is selected for its capacity to manage intricate models with numerous variables and to evaluate both direct and indirect impacts. In this study, PLS-SEM proves especially advantageous for scrutinising the correlations between IFRS adoption and financial reporting quality, as well as investigating the moderating function of internal control systems. This particular analysis approach not only offers a comprehensive framework that enables researchers to systematically evaluate and determine the reliability of measurement scales by examining the outer loading values associated with the constructs but also ensures a thorough understanding of the underlying dimensions and their respective contributions to the overall scale. Furthermore, it plays a crucial role in facilitating the assessment of the validity of the quality criteria associated with the variables under investigation by employing various statistical techniques, including convergent validity, discriminant validity, and multicollinearity analysis, thus providing a robust foundation for the measurement model.

4. Results

4.1. Descriptive Analysis

The study participants include individuals such as finance officers, chartered accountants, company secretaries, financial consultants, and auditors employed at Indian multinational corporations. The breakdown by gender reveals that 59% of the participants are male, while 41% are female. Similarly, the participants’ educational background demonstrates that 47% hold undergraduate degrees, 32% possess postgraduate qualifications, and 21% have completed high school. Regarding marital status, 68% of the participants are married, whereas 32% are single or separated. Regarding work experience, 14% have less than three years of experience, 55% have 3 to 5 years of experience, and 31% have over five years of experience in their respective fields. Analysis of the participants based on their professions shows that 27% are finance officers, 32% are chartered accountants, 17% are company secretaries, 15% are financial consultants, and 9% are auditors. A significant proportion, specifically 23%, is represented by those firms that have been operational in India for a duration ranging from 5 to 8 years, while a larger segment, accounting for 37%, consists of businesses that have been functioning for a period of 9 to 12 years, and an even greater proportion, which constitutes 40%, encompasses those enterprises that have surpassed the 12-year mark since their inception in the Indian business landscape. Additionally, it is essential to highlight that the minimum duration of existence for these firms, as they engage in commercial activities within the Indian market, is established at a baseline of 5 years. The participants are exclusively drawn from the information technology sector, which is noteworthy because it is widely recognised that a substantial proportion of MNCs that are currently conducting business operations in India predominantly belong to this particular industry.

4.2. Measurement Model Assessment

Table 1. Measurement Items’ Assessment.

Variables	Items	Outer Loadings	VIF
Accuracy	ACC1	0.914	2.870
	ACC2	0.929	3.205
	ACC3	0.918	3.107
Comparability	COM1	0.926	3.327
	COM2	0.948	3.954
	COM3	0.906	2.945
FRQ	FRQ1	0.824	2.467
	FRQ2	0.814	2.645
	FRQ3	0.894	3.126
	FRQ4	0.888	3.126
	FRQ5	0.805	1.958
Government Policy	GP1	0.656	1.490
	GP2	0.813	1.756
	GP3	0.909	3.591
	GP4	0.841	2.975
IFRS Adoption	IFRS1	0.888	3.060
	IFRS2	0.870	2.941
	IFRS3	0.844	2.387
	IFRS4	0.848	2.473
	IFRS5	0.918	4.065
Legal Requirements	LR1	0.709	1.608
	LR2	0.911	3.003
	LR3	0.815	2.147
	LR4	0.874	2.598
	LR5	0.708	1.692
Perceived Benefits	PB1	0.82	2.051
	PB2	0.760	1.248
	PB3	0.875	2.193
Perceived Ease of Implementation	PEI1	0.882	2.854
	PEI2	0.923	3.781
	PEI3	0.884	2.602
	PEI4	0.775	1.721
Relevancy	REL1	0.876	2.633
	REL2	0.900	4.309
	REL3	0.888	4.005
	REL4	0.842	2.145
Timeliness	TIM1	0.794	1.707
	TIM2	0.895	2.154
	TIM3	0.910	2.318
Understandability	UND1	0.893	2.252
	UND2	0.891	2.280
	UND3	0.869	2.050

illustrates the standardised outer loading and variance inflation factor (VIF) values of the scale items utilised in the survey conducted in this research. The outer loading must meet a minimum threshold of 0.708 to ensure the adequate contribution of an item towards measuring its corresponding variable (Sarstedt et al. 2017). The standardised outer loading values exceed 0.708 for all scale items about the variables, warranting the retention of all items for further investigation. Furthermore, the presence of multicollinearity among the items within each variable is evaluated by examining VIF values. As per Sarstedt et al. (2014), the VIF values should not surpass 5 to confirm the distinctiveness of each item within its respective variable. The findings presented in Table 1 reveal that all VIF values are below 5, indicating the absence of multicollinearity among the measurement items. Consequently, the dataset is deemed suitable for subsequent analysis.

4.3. Contruct Quality Criteria Assessment

Table 2. Construct Reliability and Validity.

Variables	Alpha	CR (rho_a)	CR (rho_c)	AVE
Accuracy	0.910	0.913	0.943	0.847
Comparability	0.918	0.930	0.948	0.859
FRQ	0.901	0.914	0.926	0.716
Government Policy	0.827	0.871	0.883	0.656
IFRS Adoption	0.922	0.924	0.942	0.763
Legal Requirements	0.867	0.920	0.903	0.652
Perceived Benefits	0.755	0.759	0.860	0.672
Perceived Ease of Implementation	0.890	0.900	0.924	0.753
Relevancy	0.900	0.901	0.930	0.769
Timeliness	0.838	0.872	0.901	0.753
Understandability	0.861	0.862	0.915	0.782

showcases the values of Cronbach’s alpha, composite reliability (CR), and average variance extracted (AVE) for the constructs utilised in this research endeavour. The Cronbach’s alpha scores for all variables surpass the critical threshold of 0.705, as Bland and Altman (1997) advocated, thereby signifying the robustness and dependability of the scale employed to gauge each of the constructs under scrutiny. Moreover, the CR rho_a and CR rho_c values exceed the 0.70 benchmark but remain below the 0.95 threshold, thereby underscoring the construct reliability and validity, as corroborated by Saari et al. (2021) and Hair and Alamer (2022). Furthermore, the average variance extracted values are observed to be higher than the essential 0.50 benchmark, implying that all constructs’ convergent validity is well-established, as elucidated by Hair and Alamer (2022). Consequently, the outcomes delineated in the table above satisfactorily meet all the requisite quality criteria standards.

Table 3. HTMT Ratio Matrix.

Variables	Accuracy	Comparability	FRQ	GP	IFRS_A	LR	PB	PEoI	Relevancy	Timeliness	Understandability
Accuracy	-
Comparability	0.758	-
FRQ	0.389	0.440	-
GP	0.768	0.803	0.398	-
IFRS_A	0.461	0.471	0.890	0.441	-
LR	0.678	0.769	0.368	0.893	0.365	-
PB	0.424	0.444	0.852	0.390	0.870	0.328	-
PEoI	0.601	0.791	0.646	0.679	0.624	0.688	0.646	-
Relevancy	0.394	0.468	0.856	0.416	0.874	0.357	0.824	0.597	-
Timeliness	0.876	0.869	0.389	0.877	0.449	0.824	0.389	0.720	0.420	-
Understandability	0.673	0.740	0.497	0.857	0.464	0.831	0.461	0.752	0.414	0.791	-

Note: PEoI = Perceived Ease of Implementation; LR = Legal Requirements; GP = Government Policy; PB = Perceived Benefits; IFRS_A = IFRS Adoption.

presents the heterotrait–monotrait (HTMT) ratio, which signifies the correlations among all variables utilised in the present investigation. The spectrum of HTMT ratio values spans from 0.328 to 0.893. Notably, the conventionally acceptable threshold for HTMT ratio values is situated below 0.85; nevertheless, it is essential to note that nine values surpassing 0.85 yet falling short of 0.90 exist. As delineated by Henseler et al. (2015), it is permissible to consider variables with an HTMT ratio extending up to 0.90. Consequently, it can be inferred that discriminant validity has effectively been ascertained amidst the reflective constructs under scrutiny in this study (Hair and Alamer 2022).

4.4. Model Fit Assessement

We analysed the goodness-of-fit indices of the model under examination. In particular, the standardised root mean square residual (SRMR) was employed for the express purpose of this evaluation. The value of SRMR was determined to be 0.072, a figure that falls below the established threshold of 0.08. Similarly, the NFI value was computed to be 0.87, lower than the critical value of 0.90. This observation serves to signify that the model exhibits a commendable level of explanatory capability, as proposed by Hu and Bentler (1998). Moving on to the f-square values, it was found that government policy has a value of 0.026, PEoI a value of 0.034, and legal requirements a value of 0.125 for IFRS adoption, thereby indicating a small effect size based on the criteria set by Cohen (1988). Notably, the f-square value for perceived benefits stands at 1.225 concerning IFRS adoption, suggesting a medium effect size, according to Cohen (1988). Additionally, the f-square value for IFRS adoption is calculated to be 0.831 in the context of FRQ, pointing towards a substantial effect size. Furthermore, the f-square values for FRQ exhibit readings of 0.155 for accuracy, 0.205 for comparability, 0.147 for timeliness, and 0.247 for understandability, all indicative of a moderate effect size. However, the f-square value for FRQ regarding relevance is notably high at 1.695, thus demonstrating a large effect size (Cohen 1988). Moreover, the R-square values were determined to be 0.134 for accuracy, 0.170 for comparability, 0.128 for timeliness, and 0.198 for understandability, all suggesting a limited level of predictive power. Furthermore, the R-square values for FRQ, IFRS adoption, and relevance were computed to be 0.697, 0.708, and 0.629, respectively, indicating a moderate degree of predictive power, as Hair et al. (2013) asserted.

4.5. Structural Model Assessment

Table 4. Hypotheses Testing.

Hypotheses	β	Mean	STDEV	T Stat	p-Values	Decision
H1a: Perceived Benefits -> IFRS Adoption	0.714	0.714	0.028	25.11	0.000	Accepted
H1b: PEoI -> IFRS Adoption	0.145	0.145	0.035	4.184	0.000	Accepted
H1c: Legal Requirements -> IFRS Adoption	0.031	0.029	0.043	0.726	0.468	Rejected
H1d: Government Policy -> IFRS Adoption	0.113	0.113	0.038	2.947	0.003	Accepted
H2: IFRS Adoption -> FRQ	0.833	0.833	0.033	25.61	0.000	Accepted
H3a: FRQ -> Relevancy	0.793	0.793	0.015	51.641	0.000	Accepted
H3b: FRQ -> Accuracy	0.367	0.367	0.036	10.194	0.000	Accepted
H3c: FRQ -> Understandability	0.445	0.445	0.035	12.857	0.000	Accepted
H3d: FRQ -> Comparability	0.412	0.412	0.034	12.164	0.000	Accepted
H3e: FRQ -> Timeliness	0.358	0.358	0.035	10.242	0.000	Accepted
Moderating Effects
Internal Control System -> FRQ	0.001	0.001	0.051	0.028	0.978	Rejected
H4: ICS × IFRS Adoption -> FRQ	0.003	0.004	0.047	0.068	0.946	Rejected

shows the boot-strapping results under 5000 subsamples and decisions on hypotheses. The hypotheses H1a, H1b, H1d, H2, H3a, H3b, H3c, and H3d are accepted at a 0.05 significance level as the p-value is less than 0.5. However, hypothesis H1c is rejected at a 0.05 significance level as the p-value exceeds 0.5. Hence, there is a significant positive impact of perceived benefits (β = 0.714; p < 0.001), PEoI (β = 0.145; p < 0.001), and government policy (β = 0.113; p < 0.001) on IFRS adoption in MNCs of India. However, there is an insignificant positive impact of legal requirements (β = 0.031; p < 0.001) on IFRS adoption in MNCs of India. Further, there is a significant positive impact of IFRS adoption (β = 0.833; p < 0.001) on FRQ in MNCs of India. Similarly, FRQ has significant positive impacts on relevancy (β = 0.793; p < 0.001), accuracy (β = 0.367; p < 0.001), understandability (β = 0.445; p < 0.001), comparability (β = 0.412; p < 0.001), and timeliness (β = 0.358; p < 0.001) of financial report of MNCs in India.

Figure 2 presents the path model of the study.

The direct effect of the ICS is positive and insignificant on the FRQ of MNCs in India. Likewise, the moderating effects of the ICS on the relationships between IFRS adoption and FRQ are positive and insignificant in MNCs in India. This indicates that the presence and absence of the ICS do not have any role in FRQ if a company adopts IFRSs.

5. Discussion

The results suggest that MNCs’ acceptance of the IFRS is significantly impacted by their perception of its advantages. When MNCs recognise a distinct benefit in utilising IFRSs, it significantly incentivises them to shift from local reporting criteria. The IFRS establishes a consistent vocabulary for financial reports, enabling shareholders and other interested parties to readily compare MNCs’ financial performance across various nations (Kushwaha et al. 2023; Pizzi et al. 2022). By removing the necessity to uphold separate sets of records for different jurisdictions, IFRSs can simplify the reporting procedure for MNCs, leading to substantial cost reductions. Global investors and creditors more readily embrace financial reports created under IFRSs. Abidance by IFRSs showcases a dedication to international optimal practices, potentially enhancing MNCs’ overall standing and trustworthiness in the worldwide market (Kushwaha and Miah 2023; Shiva et al. 2023; Turgunovna and Abrorovna 2022). MNEs with branches in diverse nations can profit from a standardised reporting structure, streamlining internal consolidation and performance assessment. Another crucial aspect propelling the successful acceptance of IFRSs in MNCs is the perceived simplicity of execution. IFRS incorporation is viewed as smoother when seen as superficial. This reduces expenses linked with instructing personnel, adjusting accounting systems, and simplifying reporting procedures (Araya 2022; Zahid and Simga-Mugan 2024). MNCs with branches worldwide can achieve quicker alignment towards a unified financial terminology if IFRS acceptance is perceived as uncomplicated. When workers and stakeholders perceive IFRS integration as easy to grasp and adhere to, there is increased approval and a smoother transition duration. A favourable perception of the ease of IFRS integration significantly affects the MNCs’ adoption process (Arvidsson and Dumay 2022; Beshimovna et al. 2024).

Additionally, governmental regulations can be vital in MNCs’ acceptance of IFRSs. Governments establish an equitable platform for MNEs operating internationally by obliging IFRS adoption. This transparency lessens information asymmetry, potentially decreasing the capital costs for MNCs by drawing in investors who comprehend standardised financial reports (Ahmad et al. 2024). IFRS adoption leads to standardised financial reporting, enabling a more straightforward comparison of MNCs’ performance across various nations (Adams and Abhayawansa 2022). Uniformity through IFRSs can simplify reporting prerequisites for MNCs. Governmental policies advocating IFRS adoption can benefit MNCs by reducing expenses, enhancing transparency, and boosting their capacity to function in the global market. Conversely, although legal stipulations can push MNCs towards embracing IFRSs, their influence on actual adoption may be restricted (Abed et al. 2022; Kausar and Park 2024). MNCs frequently prioritise market dynamics over legal directives. Standardising financial reports for global stakeholders can enhance access to funds and simplify international transactions, stimulating IFRS adoption more than legal obligations. Legal requirements for IFRS adoption can be adaptable, allowing for regional differences. This flexibility might not enforce complete IFRS adherence, particularly in nations with robust local accounting standards (Turzo et al. 2022). Implementing IFRSs can be costly for MNCs because of system modifications and educational requirements. Companies may evaluate the legal obligation against the potential advantages before adoption (Kateb 2024).

The acceptance of IFRSs by transnational corporations (TNCs) has had a notable beneficial influence on FRQ. The IFRS establishes a uniform framework, facilitating a more straightforward comparison of financial reports across TNCs operating in varying nations (Eshonqulov 2024; Mardessi 2022). This openness enables shareholders and financial experts to make more knowledgeable choices regarding worldwide investment prospects. The IFRS advocates for a fundamentals-oriented approach, concentrating on the financial essence of dealings. This diminishes the possibility of disparities and misuse in financial reporting, resulting in more trustworthy data for interested parties (Alshamsi and Ahmad 2024). Using shared terminology, the IFRS encourages enhanced comprehension of TNCs’ financial results for global audiences (Hsu and Yang 2022; Tlemsani et al. 2024). This can enhance entry to financial markets and simplify international mergers and acquisitions. Nevertheless, it is vital to recognise that executing IFRSs can be demanding, particularly for TNCs with intricate operations across different jurisdictions. Continuous endeavours are necessary to tackle these obstacles and guarantee the sustained efficiency of IFRS acceptance in elevating FRQ for TNCs (Chen et al. 2024; Parrondo and Amat 2024).

Equivalently, evidence suggests that FRQ has substantial favourable effects on the relevance, accuracy, understandability, comparability, and timeliness of the financial reporting of MNCs. FRQ plays a pivotal role in ensuring the calibre and utility of MNCs’ financial reports. These frameworks establish a set of doctrines and criteria that steer MNCs in presenting their financial data (Sebrina et al. 2023; Senan 2024). FRQs underscore the inclusion of significant data that have the potential to impact users’ judgments. This guarantees that the financial reports concentrate on the most crucial facets for stakeholders, such as investors, creditors, and analysts. For MNCs functioning in a globalised context, FRQ aids them in customising their reports to users’ particular requirements in various countries while preserving a fundamental set of pertinent information (Harymawan et al. 2023; Posadas et al. 2023). Additionally, FRQ advocates using dependable measurement techniques and uniform application of accounting doctrines. This diminishes the likelihood of inaccuracies and misunderstandings, resulting in financial reports that precisely mirror the MNC’s financial stance and performance. This precision is crucial for establishing stakeholder confidence and making educated investment decisions. Equivalently, FRQ mandates MNCs to exhibit their financial data lucidly and succinctly (Zahid and Simga-Mugan 2024). This encompasses utilising uniform terminology and furnishing adequate disclosures in the annotations to the financial statements. By advocating comprehensibility, FRQ ensures that users with a rational level of financial acumen can readily comprehend the information presented. This is especially crucial for MNCs with varied stakeholders across different countries with diverse financial literacy levels. Similarly, FRQ advocated uniformity in financial reporting across MNCs. This enables users to juxtapose the financial performance of diverse enterprises and evaluate their relative hazards and profitability (Wiharno et al. 2023). For investors contemplating investments in MNCs from various countries, comparability is vital for making enlightened selections. Standardised reporting under FRQ facilitates this comparison. Similarly, FRQ necessitates MNCs to unveil their financial reports within a reasonable timeframe after the conclusion of the reporting period. This guarantees stakeholders access to the most recent financial data to make informed decisions. Timely reporting is crucial in today’s rapidly moving financial markets, where investors require up-to-date data to respond to alterations (Anssari and Al-Tamimi 2023; Beshimovna et al. 2024). Consequently, FRQ is indispensable in amplifying the calibre and utility of financial reports for MNCs. By advocating relevance, accuracy, comprehensibility, comparability, and timeliness, FRQ ensures that financial data are trustworthy and allow stakeholders to make enlightened decisions. This benefits MNCs by cultivating confidence and transparency and contributing to a robust and effective global financial market (Ahmad et al. 2024; Hosiyatovich et al. 2023).

The immediate consequence of the ICS is favourable and inconsequential to the FRQ of MNCs in India. While a favourable consequence of the ICS on FRQ of MNCs is intuitive, our discoveries imply this consequence might be affirmative but inconsequential. This discovery could be attributed to various factors (Alshamsi and Ahmad 2024; Tawiah and Gyapong 2023). Other FRQ elements, such as intricate global operations or assertive accounting strategies within MNCs, might counteract robust internal controls. Additionally, MNCs frequently possess resilient internal controls as a foundation. Enhancements might not notably influence FRQ, which is already relatively elevated. The ICS might prioritise adherence to regulations over guaranteeing the utmost precision in financial reporting (Alruwaili et al. 2023; Eshonqulov 2024). Further investigation is essential to delve into these potentialities. Similarly, observations indicate that the moderating consequence of the ICS on the connection between IFRS adoption and FRQ is favourable but inconsequential in MNCs. This suggests that while a robust ICS might theoretically enhance FRQ post-IFRS adoption, the effect in MNCs is minimal (Kateb 2024). MNCs frequently have well-established control frameworks globally, conceivably diminishing the supplementary effect of ICS post-IFRS adoption. MNCs might prioritise upholding consistent control methodologies across various nations, overshadowing the particular impact of the ICS on FRQ post-IFRS adoption (Kausar and Park 2024; Yusran 2023).

6. Implications

This study has several implications for various stakeholders. The results about the efficacy of IFRS adoption in enhancing the quality of financial reporting can inform future modifications and clarifications to the standards above. By incorporating adoption theories, this study can offer guidance on formulating more efficient strategies for implementing future changes to the standards. Exploring adoption theories in this study could offer beneficial perspectives for organisations responsible for setting standards, allowing them to hone their strategies related to IFRS adoption. Identifying the determinants of successful adoption could assist in addressing the obstacles encountered by multinational enterprises throughout the transition phase. Regulating bodies could leverage these findings to fortify their supervisory and enforcement mechanisms, focusing on entities with inadequate internal controls. Through this study, investor trust could be bolstered by showcasing the capacity of IFRSs to enhance the reliability of financial data utilised in investment determinations. The insights derived from this research could aid analysts in evaluating financial reports by shedding light on the consequences of IFRS adoption and the importance of internal controls. The outcomes of this study on the effects of IFRS adoption, in conjunction with the moderating impact of internal control frameworks, can guide regulatory bodies as they assess accounting standard-setting policies. This knowledge could assist these bodies in advancing the quality of financial reporting within their respective domains.

7. Conclusions

This empirical investigation explored the influence of IFRS adoption on the FRQ of MNCs in India. Initially, the perceived advantages, perceived ease of implementation, and governmental policies significantly and positively impact the adoption of IFRSs within Indian MNCs. Conversely, legal requirements show a weak positive effect deemed insignificant in adoption. This indicates that Indian MNCs prioritise perceived benefits and governmental backing over legal obligations when embracing IFRSs. Subsequently, the analysis illustrates a noteworthy positive consequence of IFRS adoption on the overall FRQ of Indian MNCs. This suggests that adopting IFRSs has improved the quality of financial reporting within these organisations. Furthermore, the evaluation demonstrates that enhanced FRQ leads to considerably positive outcomes regarding financial statements’ relevance, accuracy, comprehensibility, comparability, and timeliness in Indian MNCs. This underscores the idea that IFRS adoption has contributed to more informative and transparent financial reporting methodologies. Lastly, the study reveals that ICSs exhibit a positive yet insignificant direct and moderating impact on the correlation between IFRS adoption and FRQ. This implies that although robust internal controls may be advantageous, their presence or absence does not significantly affect the influence of IFRS adoption on the quality of financial reporting within Indian MNCs.

This investigation validates the substantial enhancement in the FRQ of MNCs in India due to IFRS adoption. The perceived benefits, ease of implementation, and governmental assistance emerge as pivotal factors driving the adoption of IFRSs. While internal control systems play a positive role, their impact on the relationship between IFRS adoption and FRQ is marginal. These findings provide valuable insights for policymakers, regulators, and MNCs in India striving for improved financial transparency and global comparability. Moreover, this study paves the way for further exploration into the enduring consequences of IFRS adoption on various facets of financial reporting quality. The moderating role of internal controls warrants additional investigation across diverse industry settings and company scales. Despite the apparent insignificance of internal control systems in IFRS adoption and FRQ, future research could explore the specific rationales behind this discovery.