THE ACCOUNTING ASSESSMENT Vol. eighty six, No . three or more 2011 pp. 747–767
American Accounting Affiliation DOI: 12. 2308/accr. 00000045
Principles-Based vs . Rules-Based Accounting Standards: The Inﬂuence of Standard Finely-detailed and Audit Committee Durability on Economical Reporting Decisions Christopher P. Agoglia University of Massachusetts Amherst Timothy S. Doupnik University of South Carolina George T. Tsakumis Drexel College or university ABSTRACT: The latest accounting scams have triggered regulatory projects designed to improve audit panel oversight of corporate ﬁnancial reporting and also have led to a concern that U. S. GAAP has become also rules-based. All of us examine concerns related to these types of initiatives using two trials. CFOs in our experiments exhibit more contract and are less likely to survey aggressively under a less exact more principles-based standard than under a more precise even more rules-based common. Our results also show that CFOs applying a far more precise standard are less more likely to report strongly in the presence of a strong audit panel than a fragile audit panel. We ﬁnd no a result of audit panel strength when the standard is much less precise. Finally, we ﬁnd support for any three-path mediating model examining mechanisms generating the effect of standard accuracy on extreme reporting decisions. These effects should be appealing to U. S. policymakers as they continue to contemplate a shift to more principles-based accounting standards e. g., IFRS. Keywords: standard finely-detailed; rules-based requirements; principles-based requirements; audit committee; IFRS. Info Availability: Speak to the authors.
We give thanks to Wendy Bailey, Cathy Beaudoin, Bill Dilla, Rick Hatﬁeld, Scott Jackson, Tamara Lambert, Justin Leiby, Steve Perreault, Roger Silvers, Hun-Tong Bronze, Brad Tuttle, Xiaochuan Zheng, Laureen Maines editor, Charlie Kachelmeier senior editor, two anonymous critics, and participants at the 2009 AAA Total annual Meeting, this year's AAA Worldwide Section Midyear Conference, and the 2010 Deloitte/University of Kansas Auditing Conference, seminar for their useful comments and assistance. Editor's note: Acknowledged by Laureen Maines.
Posted: April 2009 Accepted: January 2010 Published Online: Apr 2011 747
Agoglia, Doupnik, and Tsakumis
My spouse and i. INTRODUCTION ur study looks at the effect of accounting normal precision upon ﬁnancial statement preparers' revealing judgments, and also the potential function that the review committee plays in excuse aggressive ﬁnancial reporting underneath differing numbers of standard accuracy. 1 A wave of corporate accounting scandals lately has led to a push for regulatory adjustments. As part of the Congressional plan to reform U. S i9000. ﬁnancial reporting, the Sarbanes-Oxley Act of 2002 SOX, U. S i9000. House of Representatives 2002 introduced key regulatory endeavours in an attempt to change ﬁnancial confirming and corporate governance systems. These initiatives consist of two remedies aimed at damping aggressive ﬁnancial reporting: one particular the potential usage of principles-based accounting standards and a couple of enhancement of public firm audit committees. Concern has become rising in the ﬁnancial/investing community that U. S. accounting standards are becoming too " rules-based. ” With bright-line tests and detailed assistance, U. H. standards are becoming so precise that many experience they request opportunistic interpretation by corporate executives. The perception a signiﬁcant number of executives have been concerned with meeting the notification of a rule, more so than its spirit, has led to a call to consider a more " principlesbased” regime. Consequently, SOX needed the Securities and Exchange Commission SECURITIES AND EXCHANGE COMMISSION'S to perform a study for the possible ownership of principles-based standards by U. H. ﬁnancial confirming system. Recently, the SEC moved the principles-versus-rules issue to the front burner by proposing a roadmap that may lead to the mandatory adoption with the more principles-based International Economical...