The effects of disclosure type and audit committee expertise on chief audit executives' tolerance for financial misstatements

Carolyn Strand Norman, Jacob M. Rose, Ik Seon Suh

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

This study involves an experiment where 73 Chief Audit Executives and deputy Chief Audit Executives determine the amount of adjustment required to correct a misstatement. We manipulate the financial reporting location of the misstatement (recognized vs. disclosed) and the level of audit committee expertise (high vs. low). The results indicate that financial reporting location has significant effects on internal auditors' decisions to correct misstatements. Specifically, internal auditors are more willing to waive disclosed misstatements relative to recognized misstatements. Contrary to expectations, the results do not indicate that increased audit committee expertise and associated increases in audit committee members' perceived powers cause internal auditors to be less willing to waive misstatements.

Original languageEnglish
Pages (from-to)102-108
Number of pages7
JournalAccounting, Organizations and Society
Volume36
Issue number2
DOIs
Publication statusPublished - Feb 2011
Externally publishedYes

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