Materiality Judgments and the Resolution of Detected Misstatements: The Role of Managers, Auditors, and Audit Committees

The Accounting Review, Forthcoming

53 Pages Posted: 4 Dec 2009 Last revised: 13 Feb 2012

See all articles by Marsha B. Keune

Marsha B. Keune

University of Dayton

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: March 25, 2011

Abstract

This study investigates how manager and auditor incentives, along with audit committee characteristics, are associated with materiality judgments about detected misstatements. Using data on detected misstatements that occurred between 2003 and 2006, we find auditors’ incentives to protect their reputations weaken the effect of managerial incentives associated with the pressure created by analyst following; auditors are less likely to allow managers to waive material misstatements as audit fees increase. Regarding audit committee characteristics, results reveal that audit committees with greater financial expertise are less likely to allow managers to waive material misstatements compared to audit committees with less expertise.

Keywords: Audit Committees, Audit Fees, Error Correction, Materiality, Stock Analysts

JEL Classification: M41, M43, M49

Suggested Citation

Keune, Marsha B. and Zehms, Karla M., Materiality Judgments and the Resolution of Detected Misstatements: The Role of Managers, Auditors, and Audit Committees (March 25, 2011). The Accounting Review, Forthcoming . Available at SSRN: https://ssrn.com/abstract=1517278 or http://dx.doi.org/10.2139/ssrn.1517278

Marsha B. Keune (Contact Author)

University of Dayton ( email )

Dayton, OH 45469
United States

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-234-1052 (Phone)
608-265-5031 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
709
Abstract Views
2,681
rank
34,850
PlumX Metrics