Download This PaperAudit Error
17 Pages Posted: 23 Jul 2004
Date Written: July 2004
Abstract
We analyze a setting where audit error depends on the ease with which an unaudited measure can be audited, e.g., cash flow versus accrual-based income, and demonstrate that the optimal error rate may be substantially above zero. Though counter-intuitive, this conclusion follows from the fact a measure that is easily audited may provide relatively less of the information that is critical for planning, control and valuation.
Keywords: Audit, error
JEL Classification: M49
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Detecting Earnings Management: A New Approach
By Patricia Dechow, Amy P. Hutton, ...
-
A Review of the Earnings Management Literature and its Implications for Standard Setting
-
Errors in Estimating Accruals: Implications for Empirical Research
By Daniel W. Collins and Paul Hribar
-
The Economic Implications of Corporate Financial Reporting
By John R. Graham, Campbell R. Harvey, ...
-
The Economic Implications of Corporate Financial Reporting
By John R. Graham, Campbell R. Harvey, ...
-
On the Association between Voluntary Disclosure and Earnings Management
By Ron Kasznik
-
Performance Matched Discretionary Accrual Measures
By S.p. Kothari, Andrew J. Leone, ...
-
The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors
By Ilia D. Dichev and Patricia Dechow