Ind AS Convergence: Impact on Financial Reporting and Audit Costs

On 1 April 2016, the accounting profession witnessed a structural change when India converged its accounting standards to International Financial Reporting Standards (IFRS). IFRS-converged Indian accounting standards (Ind AS), based on principle-based standards, differ from their existing domestic rule-based accounting standards (AS). The convergence substantially impacts the Ind AS-compliant firms’ reporting frameworks and audit costs. Considering these, the current study examines the impact on audit costs of selected Bombay Stock Exchange (BSE)-listed firms. Applying the signalling and institutional theoretical lens, it adopts a longitudinal study design and assesses the CMEI ProwessIQ database, the S&P BSE 200 index and annual reports of the selected firms. A total of 105 sample firms were chosen by applying a simple random sampling technique covering a study period of 14 financial years (2009–2022). Applying inferential statistical tools, namely fixed-effect penal regression together with difference-in-difference, it tests hypotheses. Empirical results suggest that Ind AS implementation is associated with an approximately 47.7% increase in audit fees, driven by declining audit efficiency, increased risk associated with fair value measurements and a premium linked with the firm’s expertise. It offers practical implications, acknowledges a few limitations and links those with a future research road map.