Institutional efforts in the U.S. to develop a conceptual framework for business enterprises can be traced to the Paton and Littleton monograph in 1940 and later to the two Accounting Research Studies by Moonitz and Sprouse in 1962-1963. A committee of the American Accounting Association issued an influential report in which it advocated a “decision usefulness” approach in 1966, which was carri...

Embedded in canonical macroeconomic models is the assumption of frictionless financial markets, implying that the composition of borrowers’ balance sheets has no effect on their spending decision. As a result, these models have a difficult time accounting for the feedback effects between financial conditions and the real economy during periods of financial turmoil. Financial frictions—reflectin...

Investors, financial reporting policymakers, and accounting educators emphasize the importance of financial statement comparability. Accounting researchers have found it difficult to develop empirical measures of comparability that correspond to typical views of the construct. The measures used in recent research are removed from firms’ accounting treatments and are likely to be driven by econo...

This paper develops a simple business-cycle model in which financial shocks have large macroeconomic effects when private agents are gradually learning their economic environment. When agents update their beliefs about the unobserved process driving financial shocks to the leverage ratio, the responses of output and other aggregates under adaptive learning are significantly larger than under ra...

In 2008 all ECB publications feature a motif taken from the 10 banknote.

This study presents a theoretical model of the working paper review process within the financial statement audit. The model is based on the concepts of reliability engineering with auditors functioning as the main control components. Characteristics of the model are investigated using simulation and differential analysis. Our simulation results show that the performance of a combined review tea...

Research summary: We document the extent of fraudulent reporting among 467 private Chinese technology companies. Comparing the financial statements concurrently submitted to two different state agencies, we demonstrate a systematic gap in reported profit figures in the two sets of books. We find: (1) more than half the sampled companies report incentive-compatible, materially discrepant profit ...

This paper examines the usefulness of accounting information in predicting earnings management. We investigate a comprehensive sample of firms from 1971-2000 that restated annual earnings. We find that firms restating earnings have high market expectations for future earnings growth and have higher levels of outstanding debt. We also find that a primary motivation for the earnings manipulation ...

Article history: Received 26 May 2011 Received in revised form 5 March 2012 Accepted 6 March 2012 Current auditing standards require auditors to conduct a fraud brainstorming session aimed at considering ways in which the audit client's financial statements might be fraudulently misstated. Lynch et al. (2009) document that computer-mediated fraud brainstorming is significantly more effective th...

This paper characterizes the optimal linear financial transaction tax in an equilibrium model of competitive financial markets. As long as investors hold heterogeneous beliefs about the returns of assets in fixed supply and the planner calculates welfare using any single belief, we expect the optimal tax to be positive, even when a fraction of trading is fundamental. Strikingly, the optimal tax...