The role of accounting disaggregation in detecting and mitigating earnings management

Eli Amir, Eti Einhorn*, Itay Kama

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant theory considers biases in reporting mostly at the aggregated level of the accounting report. By introducing accounting disaggregation into the conventional theoretical framework of earnings management, this study highlights the essential role that disaggregated accounting data play in detecting and mitigating reporting manipulations. Disaggregated reports are shown to be especially effective when they consist of accounting items that are tightly interrelated by their fundamental economic nature, differ considerably in their sensitivity to reporting manipulations, and vary in their signs.

Original languageEnglish
Pages (from-to)43-68
Number of pages26
JournalReview of Accounting Studies
Volume19
Issue number1
DOIs
StatePublished - Mar 2014

Funding

FundersFunder number
Henry Crown Institute of Business Research in Israel

    Keywords

    • Accounting
    • Disaggregated accounting data
    • Earnings management
    • Financial ratios
    • Financial reporting
    • Information asymmetry
    • Ratio analysis
    • Reporting bias

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