The Impact of Economic Uncertainty on the Comparability of Financial Statements with Emphasis on the Interactive Role of Quality

The economic uncertainty is one of the biggest difficulties for the reliability and consistency of the financial reporting among companies. This paper demonstrates how economic uncertainty affects FS comparability, and it sheds light on the interactive effects of FRQ as a moderator. Building on existing empirical and theoretical research, the paper constructs a conceptual model in which uncertainty destroys comparability due to greater managerial discretion, value ambiguity, and variability of disclosure. Nevertheless, high quality of reporting in terms of earning quality, disclosure transparency and presentation completeness can help to dampen these negative repercussions and maintain the comparability across entities and times. The paper draws on the evidence from cross-sectional, time-series and experimental studies to explain how the interplay between uncertainty and quality applies under different institutional and regulatory structures. The results highlight the necessity of business regulation, law enforcement and worldwide accounting harmonization regarding perturbances in order to maintain the financial information utility during turmoils. The research integrates the accounting literature by developing the moderation effect of quality in an uncertainty–comparability firm value relation and provides a motivation to conduct empirical testing in relation with cross-country IFRS data.