Accounting diversity refers to the differences that exist between the characteristics of the financial reporting frameworks used in different countries. This diversity appears as a result of differences in the factors that affect the development of financial reporting frameworks. The accounting literature presents several factors that cause this diversity. These factors are mainly related to environmental factors.
In this article, we review the accounting literature to learn about the reasons for accounting diversity, and to better understand how accounting diversity affects accounting harmonization. We explore the environmental factors that are considered most influential in causing accounting diversity in general and in developing countries in particular; with a special focus on the Arab and Islamic countries.
This literature review is useful for two reasons. First, in general, we strengthen awareness of the existence of and the causes for accounting diversity. It is important to understand the current limitations of the drive towards international accounting harmonization. Second, more specifically, we prepare the road for a more in-depth analysis of the environmental factors that are considered most influential in causing accounting diversity. This analysis can assist policy-setters in their efforts to realize further international accounting harmonization.