Standard setters have sought a conceptual framework to guide development of a consistent set of accounting standards. However, the framework has two key weaknesses. First, it is very broad, lacks a measurement framework, and can be used ex post to justify a wide range of actual accounting...

We examine how various types of accounting policy changes affect financial misstatement risk and the ways auditors mitigate that risk. We find greater misstatement risk for both idiosyncratic and industry-wide accounting policy changes and that auditors play an important role in mitigating these...