Strict mandates on financial reporting sometimes lead to mismatch between a company’s business cycle and its fiscal year on paper. Recently, researchers have examined the reliability of financial reports under the mismatched condition compared to that when the seasonal business activity is aligned with the government-mandated fiscal year. They found that reports produced in the mismatch condition had more abnormal accruals. However, the low reporting quality was attributable to unintentional, and not deliberate, estimation errors.
Researchers examine financial reporting consequences of rigid accounting regulation
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