Auditor Responses to Estimation Uncertainty in Financial Statements

dc.contributor.author Szerwo, Brandon
dc.contributor.author Axelton, Zhuoli
dc.contributor.author Gramlich, Jeffrey
dc.date.accessioned 2021-11-12T18:49:32Z
dc.date.available 2021-11-12T18:49:32Z
dc.date.issued 2021
dc.description.abstract Estimation uncertainty around accounting estimates poses unique challenges for auditors when conducting their audits. Moreover, auditors face heightened expectations from investors and regulators to improve audit quality of accounting estimates and better communicate risks related to material accounting estimates. Given these challenges and expectations, we examine auditor responses to estimation uncertainty. We find that auditors increase communication to financial statement users in the form of topic-specific explanatory langue and, in more recent years, critical audit matters in response to estimation uncertainty. This association is more pronounced when investor information needs are higher. Further, we demonstrate that auditors also charge higher risk premiums and extend more effort in response to estimation uncertainty. We believe this study can provide insights to regulators, investors, and other financial statement users by demonstrating that auditors respond to the overall level of estimation uncertainty in the financial statements in response to investor information needs and regulatory standards.
dc.identifier.uri http://hdl.handle.net/10125/77003
dc.subject estimation uncertainty
dc.subject audit opinion explanatory language
dc.subject critical accounting policies & estimates
dc.title Auditor Responses to Estimation Uncertainty in Financial Statements
dc.type.dcmi Text
Files
Original bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
HARC-2022_paper_269.pdf
Size:
903.17 KB
Format:
Adobe Portable Document Format
Description: