Researchers, practitioners, and standard setters emphasize the importance of disaggregating financial statements into operating and financial activities. However, there is a lack of research demonstrating that this disaggregation improves forecasts of profitability. In this study, we consider...

This paper documents that previous experience under a performance evaluation system can systematically bias decision makers' subsequent evaluations. In the experiment reported in this paper, subjects made a series of investment decisions under one of four accounting systems, created by crossing...

This study identifies conditions under which the audit risk model does, and does not, describe audit planning (investment and pricing) decisions. In an experiment, audit partners and managers examined one of two cases where a material misstatement ? error or irregularity ? was discovered. The...

In this study, we develop and test a framework suggesting that auditors consider three sources of business risk when setting audit fees: (1) the level of audit investment and residual (acceptable) audit risk, (2) litigation exposure unrelated to audit risk, and (3) residual business risk....

Based on data collected from 616 experienced financial officers who use U.S. GAAP or IFRS and are domiciled in the U.S., Europe, or Asia, we examine how reporting standards (U.S. GAAP vs. IFRS) and domicile (U.S. vs. non-U.S.) affect earnings management (real vs. accrual). U.S. firms using U.S....