Accounting complexity, misreporting, and the consequences of misreporting

Peterson, Kyle

doi:10.1007/s11142-011-9164-5

Cited by 109 publications

(85 citation statements)

References 30 publications

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“…These perspectives include organizational complexity (Bushman et al 2004), financial reporting complexity (Li 2008), and information complexity (Plumlee 2003;Peterson 2012). In such studies, complexity is undefined conceptually but studied through a variety of proxies.…”

Section: Complexity In Accountingmentioning

confidence: 99%

“…Finally, we refer to the AICPA and statelevel accounting bodies as professional accounting associations. Peterson 2012). These studies take complexity as a given in order to investigate the economic consequences of complexity as opposed to questioning the concept of complexity itself.…”

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confidence: 99%

“…First, previous research on accounting complexity has focused on studying the relationship between different measures of complexity and firm, manager, or user performance (e.g., Plumlee 2003;Bushman et al 2004;Li 2008;Miller 2010;Lehavy et al 2011;Peterson 2012;Filzen and Peterson 2015). Such studies generally measure complexity using quantitative proxies, which are presented as objective characteristics of complexity.…”

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confidence: 99%

“…of the underlying economic transactions and financial reporting standards relevant to companies (i.e., information complexity) (Plumlee 2003;Peterson 2012;Bobek Schmitt, Chen, Hageman, and Tian 2016). This research focuses on the effect that complexity in taxation and dividends has on users of that information.…”

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confidence: 99%

“…In relation to financial reporting standards, Peterson (2012) finds that revenue recognition complexity increases the probability of revenue restatements due to both intentional and unintentional behavior. Thus, while complex accounting may allow managers to manipulate financial statements, it may also increase the likelihood of mistakes and error when applying standards (Peterson 2012).…”

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confidence: 99%

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The Accounting Profession's Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters

Baudot

Demek

Huang

2018

Auditing: A Journal of Practice &Amp; Theory

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link Acknowledgements:This paper reflects an effort to collaborate across paradigms. We extend our gratitude to the coeditors in their consideration of our paper. We thank the participants in the audit-reading group at the University of Central Florida for their early ideas and encouragement. We also appreciate the editorial assistance of Wioleta Olczak.1 The Accounting Profession's Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters ABSTRACTRegulators, standard setters, and the accounting profession maintain that complexity in accounting standards is a significant issue. However, it is unclear what complexity means in the context of accounting standards. This study examines, via comment letter submissions, the accounting profession's engagement with complexity in accounting standards. We analyze comment letters submitted to the Financial Accounting Standards Board over a 12-year period and find the profession characterizes complexity through three dimensions -multiplicity, diversity, and interrelatedness. We examine the Big 4's discourse on these dimensions and observe consistency between audit firms in their discourse on several features. For instance, we find that firms primarily oppose proposed FASB changes when firms perceive those changes to increase rather than decrease complexity. Additionally, firms perceive proposed changes to affect financial statement preparers more often than other stakeholders. However, the Big 4 do not hold universal opinions as to the root causes of complexity. At the cross-firm level, we find inconsistencies that imply heterogeneity in the Big 4's discourse on root causes. Such inconsistency may, in and of itself, construct accounting complexity. Ultimately, we maintain that the Big 4's engagement with accounting standards has consequences for how complexity is thought and acted upon in accounting standards.

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Section: Complexity In Accountingmentioning

confidence: 99%

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confidence: 99%

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confidence: 99%

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The Accounting Profession's Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters

Baudot

Demek

Huang

2018

Auditing: A Journal of Practice &Amp; Theory

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Do enhanced derivative disclosures work? An informational perspective

Ren

Taffler

2021

Journal of Futures Markets

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Firms use derivatives both for hedging and nonhedging purposes. The Statement of Financial Accounting Standards No. 161 (SFAS 161) requires firms to disclose the purposes of their derivatives usage, thereby helping investors to evaluate the effects of derivatives usage on firm performance. Using a hand-collected sample of US listed firms and a difference-in-differences research design, we find that, compared with nonderivative-users, derivative-users compliant with SFAS 161 experience a significantly greater reduction in stock illiquidity and the probability of informed trading in the post-SFAS 161 period, and such impact is evident only for firms with a high degree of investor attention.

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The impact of IFRS complexity on analyst forecast properties: The moderating role of high quality audit

et al. 2021

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This paper examines the impact of International Financial Reporting Standards (hereafter IFRS) complexity on analyst forecast properties including forecast errors, forecast dispersion and forecast revision. Because high-quality audit is likely to moderate the effect of complexity on analyst forecast properties, Industry Specialization (ISP) as a proxy for high quality audit is introduced as a moderating variable in this paper. The complexity of individual IFRS standards is measured based on IFRS reconciliation statements capturing the adjustments on accounts affected by the changes in accounting standards.We analyze 322 companies listed on the Australian Securities Exchange (ASX). Our results suggest that all IFRS standards are not equally complex. A few standards are relatively more complex. These standards have a positive effect on analyst forecast errors, forecast dispersion and forecast revision. In addition, we find that high quality audit (proxied by city-level industry specialist auditors) can mitigate the adverse impact of IFRS complexity on analyst forecast errors but not on forecast dispersion and revision. More interestingly, the mitigating effect of high quality audit is restricted to only a group of companies exposed to a higher level of aggregate IFRS complexity. The findings of our study contribute to the IFRS literature by identifying the most complex accounting standards. Secondly, this study provides an ex-ante experiment in IFRS adoption, which can be used by adopting countries to understand the impact of IFRS on the analyst forecasts. Finally, our study helps regulators to understand the effects of the complexity of accounting standards on users of financial statements.

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Accounting complexity, misreporting, and the consequences of misreporting

Cited by 109 publications

References 30 publications

The Accounting Profession's Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters

The Accounting Profession's Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters

Do enhanced derivative disclosures work? An informational perspective

The impact of IFRS complexity on analyst forecast properties: The moderating role of high quality audit

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