Management bias across multiple accounting estimates

• 成果类型: Article
• 署名作者: Seidel, Timothy A.; Simon, Chad A.; Stephens, Nathaniel M.
• 署名单位: Brigham Young University; Utah System of Higher Education; Utah State University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-019-09518-8
• 发表日期: 2020
• 页码: 1-53
• 关键词: earnings management; valuation allowance; Audit quality; accruals; performance; incentives; IMPACT

摘要

We examine whether managers appear to aggregate bias in multiple subjective accrual estimates to meet or just beat analyst expectations. We also consider whether the updated language in recent PCAOB auditing standards, focusing auditors on the potential for bias across multiple estimates, impacted this method of managing earnings. Using hand-collected data from a sample of manufacturers, we find that meeting or just beating the most recent consensus analyst earnings forecast is positively associated with income-increasing bias aggregated from multiple accounting estimates. We also find that this relation attenuates in the years following the issuance of PCAOB auditing standards. Further analyses reveal that, after these standards were released, firms increased the use of income-increasing, unexpected non-GAAP exclusions to meet or just beat expectations, an alternative technique subject to less auditor scrutiny.