The Influence of Religion on the Strength of Auditing and Reporting Standards

In this paper, the influence of religion on the strength of auditing and reporting standards (SARS) is examined; through the use of robust econometric identification strategies including fixed effect ordinary least squares and a split regression, on 117 countries for the years 2012–2021. The findings show that religious beliefs drive the strength of auditing and financial reporting quality. It is found that the belief in and practice of religion increases the strength of auditing and financial reporting standards regardless of the dominating religion. In the split regression analysis, it is shown that the relationship between religion and SARS is stronger in Christian-dominated countries, whereas religious activity attendance has a stronger relationship with SARS in Muslim-dominated countries. The results imply that religious beliefs do indeed impact the financial reporting activities of the country.