The Role of Disaggregated Accounting Data in Detecting and Suppressing Earnings Management

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant accounting theory considers biases in reporting earnings mostly at the aggregated level of the reported earnings. By analyzing reporting manipulations at the disaggregated level of the earnings report, this study highlights the essential role that disaggregated accounting information plays in detecting and suppressing earnings management activities. Disaggregated accounting information is shown to be especially effective in this role when it consists of components that are tightly interrelated by their fundamental economic nature and highly diverse in their sensitivity to reporting manipulations