Context-Dependence of Auditors' Interpretation of the SFAS No. 5 Probability Expressions

Posted: 27 Feb 1998

See all articles by Tarek S. Amer

Tarek S. Amer

Northern Arizona University

Karl Hackenbrack

Vanderbilt University - Accounting

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: VOL 12, NO 1, FALL 1996

Abstract

SFAS No. 5 requires accrual of contingent losses which are deemed "probable." This disclosure criterion is intended to be applied uniformly across a variety of contexts. We performed an experiment which examined whether audit managers' interpretations of the SFAS No. 5 probability expressions are influenced by one contextual feature event base rate. Counter to the intention of the FASB interpretations of the expression probable were positively associated with event base rate.

JEL Classification: M41

Suggested Citation

Amer, Tarek S. and Hackenbrack, Karl and Nelson, Mark W., Context-Dependence of Auditors' Interpretation of the SFAS No. 5 Probability Expressions (VOL 12, NO 1, FALL 1996). CONTEMPORARY ACCOUNTING RESEARCH. Available at SSRN: https://ssrn.com/abstract=55459

Tarek S. Amer (Contact Author)

Northern Arizona University

PO Box 15066
Flagstaff, AZ 86011
United States

Karl Hackenbrack

Vanderbilt University - Accounting ( email )

Nashville, TN 37203
United States

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

448 Sage Hall
Ithaca, NY 14853
United States
607-255-6323 (Phone)
607-254-4590 (Fax)

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