Business, Management and Accounting
4 years ago

Auditors demand accuracy in financial statements with increased disaggregation.

The Accounting Review
Financial Statement Disaggregation Decisions and Auditors' Tolerance for Misstatement
Robert Libby, Timothy J. Brown

Paper Summary

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The study looked at whether breaking down income statement numbers makes them more accurate. Experienced auditors found and corrected smaller errors in the broken-down numbers. They also thought that breaking down numbers would make it more likely for errors to be caught by regulators. However, if the broken-down numbers were only in the notes, the effect was smaller. People disagreed on whether broken-down numbers are important for setting limits on errors. This shows a possible issue with current auditing rules. Breaking down numbers voluntarily could actually make income statement totals more reliable.