An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Liming Guan
University of Hawaii At Manoa

Sharon Cox
University of Hawaii At Manoa

John Wendell
University of Hawaii at Manoa

Abstract: Research has shown that managers and their auditors are less likely to condone a material misstatement of earnings in comparison to a smaller, immaterial, misstatement of earnings, but there has been no study comparing immaterial misstatements of different sizes. This study compares the treatment of different levels of immaterial misstatements by management using archival data to see if the size of the misstatement is a factor even when the misstatements being compared are very small. The results show that the size of the misstatement strongly influences the actual rate of misstatement.

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