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Essay / Research Paper Abstract
A 6 page paper seeking to answer the question of the title. Bias in financial reporting was documented more than 100 years ago, and it has been an ongoing problem since that time. Auditing is thought to reduce that bias, but does it have its full intended effect? Research indicates that deep bias begins with management and perhaps away from financial activities. It also indicates that auditing causes alteration of financial reports well before they are made public, meaning that it does indeed reduce bias in financial reporting. Sarbanes-Oxley is causing changes in basic accounting operations in many companies, which in the future will have a wealth of data that should lend itself well to research in auditing's effect on bias. Includes an abstract. Bibliography lists 9 sources.
Page Count:
9 pages (~225 words per page)
File: CC6_KSauditBias.rtf
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Unformatted sample text from the term paper:
Bias in financial reporting was documented more than 100 years ago, and it has been an ongoing problem since that time. Auditing is thought to reduce that bias, but
does it have its full intended effect? Research indicates that deep bias begins with management and perhaps away from financial activities. It also indicates that auditing causes alteration
of financial reports well before they are made public, meaning that it does indeed reduce bias in financial reporting. Sarbanes-Oxley is causing changes in basic accounting operations in many
companies, which in the future will have a wealth of data that should lend itself well to research in auditings effect on bias. Introduction
It is a natural tendency for managers to want to present their businesses in the most favorable light possible. Certainly there are many financial incentives for presenting glowing
reports to stakeholders, particularly investors whose capital the public company craves. At a 2000 corporate governance conference hosted by the Federal Reserve Bank of New York, then-current Securities and
Exchange Commission (SEC) director Arthur Levitt stated in the keynote address that "No market has divine right to investors capital," that it is the responsibility of organizations to ensure that
their financial reporting is full, fair and unbiased. Despite long-term attention to the issue of bias, there have been many instances in recent
years in which auditing appears not to have been effective. Those are well known cases, however, the ones that make national news. There are many more in which
auditing turns back or restates biased information before it is made public. The purpose here is to assess where auditing is in this regard and where it might be
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