Chapter

Accounting and Economics: What We Learn from Analytical Models in Financial Accounting and Reporting

Alfred Wagenhofer

in The Economics and Politics of Accounting

Published in print March 2004 | ISBN: 9780199260621
Published online January 2005 | e-ISBN: 9780191601668 | DOI: http://dx.doi.org/10.1093/0199260621.003.0001
 Accounting and Economics: What We Learn from Analytical Models in Financial Accounting and Reporting

Show Summary Details

Preview

The objective is to discuss the merits of analytical models in financial accounting research. Analytical models are particularly useful for gaining insights into situations that are characterized by strategic interactions of various decision-makers with information asymmetry and conflicting interests. Describes the common model structures used in this kind of research, typical assumptions, and major results of the models. Provides examples including aggregations, conservatism, earnings management, and auditing as a basis for an evaluation of the costs and benefits of analytical research. A major advantage is the ability to derive results that run counter to common wisdom, thus enhancing our understanding of real phenomena as well as identifying the conditions under which certain results hold or do not hold. Finally, it considers robustness issues and empirical testing of analytical results, and policy recommendations based on them.

Keywords: accounting; accounting policy; aggregations; analytical models; analytical research; auditing; conservatism; costs and benefits of analytical research; earnings management; empirical testing; robustness

Chapter.  10559 words. 

Subjects: Financial Markets

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.