To read this content please select one of the options below:

Managing the risk of misleading financial metrics in annual reports: A first step towards providing assurance over management’s discussion

Dennis Caplan (University at Albany (State University of New York), 1400 Washington Ave., Albany, NY 12222, United States) *
Saurav K. Dutta (University at Albany (State University of New York), 1400 Washington Ave., Albany, NY 12222, United States)

Journal of Accounting Literature

ISSN: 0737-4607

Article publication date: 11 May 2016

Issue publication date: 30 June 2016

334

Abstract

Recent public policy initiatives seek greater transparency in financial reporting through an honest, balanced and thorough management discussion of company performance in the annual report. Management’s discussion invariably includes key performance indicators, such as financial ratios, relevant to external stakeholders. We model the impact of accounting estimates, assumptions, choices and errors on the risk of misleading financial ratios. This framework is illustrated through good and bad examples of financial reporting practices and by simulation of financial data of public companies. We provide a structured approach to inform policymakers, auditors and other stakeholders of the incremental financial reporting risk that accompanies current regulatory efforts.

Keywords

Citation

Caplan, D. and Dutta, S.K. (2016), "Managing the risk of misleading financial metrics in annual reports: A first step towards providing assurance over management’s discussion", Journal of Accounting Literature, Vol. 36 No. 1, pp. 1-27. https://doi.org/10.1016/j.acclit.2016.05.001

Publisher

:

Emerald Publishing Limited

Copyright © 2016, Emerald Publishing Limited

Related articles