We examine how various types of accounting policy changes affect financial misstatement risk and the ways auditors mitigate that risk. We find greater misstatement risk for both idiosyncratic and industry-wide accounting policy changes and that auditors play an important role in mitigating these...

We examine the effect of interpretive accounting guidance on a direct and observable cost of financial reporting: audit fees. Many contend that U.S. GAAP has too much interpretive guidance, making it complex and difficult to assimilate. This effect would lead to higher audit effort and higher...