Disclosure, Foreign registrants, Disclosure requirements, Filings

Linda S. McDaniel, William R. Kinney, Jr., Expectation-Formation Guidance in the Auditor's Review of Interim Financial Information, Journal of Accounting Research, Vol. 33, No. 1 (Spring, 1995), pp. 59-76

Disclosures, Loss contingency, Stock price response, Earnings quality

William R. Kinney, Jr., Gerald L. Salamon, Regression Analysis in Auditing: A Comparison of Alternative Investigation Rules, Journal of Accounting Research, Vol. 20, No. 2, Part I (Autumn, 1982), pp. 350-366

Auditing, Sampling, Substantive test, Receivables

In this paper we present evidence on the existence of seasonality in monthly rates of return on the New York Stock Exchange from 1904–1974. With the exception of the 1929–1940 period, there are statistically significant differences in mean returns among months due primarily to large January returns. Dispersion measures reveal no consistent seasonal patterns and the characteristic exponent seems invariant among months. We also explore possible implications of the observed seasonality for the capital asset pricing model and other research.

[This paper reports the results of an experiment that examines the influence of uncertainty about the probability that a future loss will occur ("ambiguity") on auditors' and financial statement users' judgments about appropriate reference to contingent losses in audit reports. Application of Einhorn and Hogarth's (1985) ambiguity model suggests that, with respect to losses of low (high) probability, both auditors and users will act as if an ambiguous probability of loss is higher (lower) than a precise probability of the same magnitude, thus demonstrating a conservative (unconservative) reaction to ambiguity. In addition, since auditors may jeopardize client relations when they unnecessarily make audit report reference to contingent losses, auditors may react less conservatively to ambiguity than do users. The results of the experiment support these predictions.]

This study reports the results of an experiment in which audit seniors made judgments in analytical review and compliance testing settings. In both settings, results consistent with the hypothesized use of the anchoring and adjustment heuristic were observed. With respect to analytical review, the study alerts auditors to the potential importance of forming expectations concerning a client's audited values without considering the recorded (book) values. With respect to compliance testing, a judgment procedure that mitigates the potentially dangerous consequences of anchoring when judgmental Inferences from sample information must be made is presented. Results of the compliance study were used by the Sampling Standards Task Force of the AICPA in developing Statement on Auditing Standards No. 39, entitled, "Audit Sampling."

This paper reviews auditing research on the process by which auditors form their opinions on financial statements. A structure for this research is provided to organize the review and to provide insights into areas where research is needed. This structure is obtained by cross-classifying steps in theory development and steps in the opinion formulating process. While several important lines of research have begun, the primary conclusion is that a great deal of potentially important research has not been performed.