INTERPRETATION OF UNCERTAINTY EXPRESSIONS: A CROSS-NATIONAL STUDY INTRODUCTION

Uncertainty and judgment are inherent in both the financial reporting and auditing domains. Auditing Sandards use verbal probability(uncertainty) expressions to establish thresholds for when sufficient evidence has been gathered and auditors frequently use and interpret such expressions(Amer, Hackenbrack, and Nelson, 1994). Financial reporting standards also use uncertainty expressions in establishing criteria for the recognition, measurement, or disclosure of items, and both accountants and auditors are required to attach meaning to those expressions. The expressions“remote”,“Areasonably possible”, and“probable” in the FASB's Statement of Financial Accounting Standards No. 5 are examples. Daviıdson and Chrisman(1994) identified some 33 different uncertainty expressions used in Canadian accounting and auditing standards. Even the basic elements of financial statements are defined ın terms of probability as exemplified by the FASB's SFAC 6 definition of an asset as"probable future economic benefits obtained or controlled by a particular entity..."[SFAC 6, par. 25, emphasıs added].

International Accounting Standards(IAS), developed for worldwide usage to enhance the comparability of financial reports across countries, also include a number of uncertainty expressions. Necessary conditions for cross-national comparability include the use of a single set of standards and consistent interpretation of those standards across countries. To the extent that uncertainty expressions used in IAS are interpreted differently by accountants and auditors in different countries, the cross-national comparability of financıal reports will suffer. This study

addresses the research question of whether interpretations of IAS uncertainty expressions by