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| Author: | Nelson, M. Kenney, W. Jr |
| Title: | The effect of ambiguity on loss contingency reporting judgments |
| Journal: | Accounting Review
1997 : APR, VOL. 72:2, p. 257-274 |
| Index terms: | ACCOUNTING LOSS CONTINGENCY THEORY |
| Language: | eng |
| Abstract: | This paper reports the results of an experiment that examines the influence of uncertainty about the probability that a future loss will occur ("ambiguity") on auditors' and financial statement users' judgments about appropriate reference to contingent losses in audit reports. Application of Einhorn and Hogarth's (1985) ambiguity model suggests that, with respect to losses of low (high) probability, both auditors and users will act as if an ambiguous probability of loss is higher (lower) than a precise probability of the same magnitude, thus demonstrating a conservative (unconservative) reaction to ambiguity. |
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