The Factors That Influence the Adoption of the International Standards on Auditing in Jordan

[Abstract] The purpose of this paper is to determine the factors that influence the policy makers in Jordan in adopting the International Standards on Auditing (ISA). Previous studies, Jordanian documents, and Structured Interviews provide an in-depth understanding of the adoption of ISA by policy makers in Jordan. The researcher has met 25 respondents. The investigation reveals that the respondents have the same answers related to reasons of adopting the ISA by the policy makers in Jordan. This paper found that the control and liability are major factors toward applying the ISA in Jordan. In addition to that the huge cost, Jordanian laws, foreign investors, Jordan size, and the lack of knowledge and experience by the policy makers such as (Jordanian Association of certified public Accountants) prevent those policy makers from issuing local standards, so, they adopt the ISA in Jordan. [Keywords] international standards on auditing; local standards; Jordanian laws and legislations; foreign investments; Jordan Introduction Recently, Jordan has achieved a big success in attracting foreign investments. Foreign investors, policy makers in Jordan, creditors, and other users of the financial statements depend on the external auditor's reports that use the International Standards on Auditing. Those reports seem more credible and have a clear disclosure about the financial statements, leading to the attraction of investments in Jordan and achieve more stability for its economy. Therefore, the Jordanian government has become concerned about adopting the international standards more than issuing local standards. In addition to that, the Jordanian government has issued laws and regulations to achieve this goal and attract more investments. This paper focused on the adoption of the international standards on auditing by the Jordanian government and the Jordanian Association of Certified Public Accountants (JACPA). According to the Jordanian laws and legislations, the external auditor and shareholding companies should comply with the ISA. The respondents showed that using the ISA rather than the local standards gives the users of the financial statements the consistency to make their decisions that fulfill their interests since foreign investors are familiar with the ISA more than with the Jordanian local standards. The use of ISA has become essential and required by many users of the financial statements. The ISA are worldwide standards; therefore, most countries have adopted them. During the interviews it was noted that the adoption of the ISA would make the investors' decisions related to their investments easier and more reliable. The respondents stated that changing the ISA into local standards negatively affects the foreign investments in Jordan because of the investors' determination and the Jordanian laws to adopt the ISA. Previous studies, such as Monir Zaman (2005), showed that the adoption of the IAS came about as a result of key international donor/lending institutions prerequisite. This research pointed out that the policy makers in Jordan tend to keep on using the ISA and neglecting any idea about the change into local standards. In addition to that, the practical nature of auditing showed that there is a big gap between the local standards and the ISA. Moreover, another study by Sa' adi (2005) showed that most of the world, particularly the Arab Countries have adopted the ISA. He revealed that the local standards are not effective and considered a negative burden on the local audit profession. In addition to that, policy makers in Jordan could not issue local standards because they lack the experience. There are limited literatures in Jordan that clearly capture the adoption of the ISA. In one part of this paper, the main aim is to propose that view as an essential ingrethent for audit in Jordan. The next part of the paper offers a brief explanatory definition for the ISA, the factors that affect the adoption of the ISA, and the research problem followed by a discussion on Structured Interviews. …