Managing the risk of misleading financial metrics in annual reports: A first step towards providing assurance over management's discussion

Dennis Caplan and Saurav K. Dutta

Journal of Accounting Literature, 2016, vol. 36, issue C, 1-27

Abstract: Recent public policy initiatives seek greater transparency in financial reporting through an honest, balanced and thorough management discussion of company performance in the annual report. Management's discussion invariably includes key performance indicators, such as financial ratios, relevant to external stakeholders. We model the impact of accounting estimates, assumptions, choices and errors on the risk of misleading financial ratios. This framework is illustrated through good and bad examples of financial reporting practices and by simulation of financial data of public companies. We provide a structured approach to inform policymakers, auditors and other stakeholders of the incremental financial reporting risk that accompanies current regulatory efforts.

Keywords: MD&A; Financial reporting transparency; Audit risk; Financial ratios (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0737460716300271
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joacli:v:36:y:2016:i:c:p:1-27

DOI: 10.1016/j.acclit.2016.05.001

Access Statistics for this article

Journal of Accounting Literature is currently edited by S. Asare and W. R. Knechel

More articles in Journal of Accounting Literature from Elsevier
Bibliographic data for series maintained by Catherine Liu ().