Characteristics of Accounting Standards and SEC Review Comments

SYNOPSIS

As mandated by Sarbanes-Oxley, the SEC reviews the financial reports of public companies and challenges the appropriateness of accounting that seems questionable or unclear. We investigate whether the likelihood of an SEC comment (challenge), and the time needed to resolve such comments, depends upon either of two characteristics of the underlying accounting standard—rules and accounting estimates. We find that the probability of an SEC comment increases ...more