Corporate Governance

The Reliability of Preliminary Earnings Releases

By Harvard Law School Program on Corporate Governance

In the paper, The Unintended Consequences of PCAOB Auditing Standards Nos. 2 and 3 on the Reliability of Preliminary Earnings Releases, forthcoming in the Journal of Accounting and Economics, we examine the trade-off that companies face in providing value relevant information on a timely basis through preliminary earnings announcements (PEAs) versus the potential loss of reliability from releasing information prior to the audit report date. Historically, the vast majority of publicly-traded companies wait until after the audit report date (i.e., after the completion of audit fieldwork) to release preliminary earnings information. However, the implementation of Public Company Accounting Oversight Board Auditing Standards No. 2 (?AS2?) on internal control and No. 3 (?AS3?) on audit documentation resulted in delaying completion of the audit for a large number of public companies.

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Full post as published by The Harvard Law School Corporate Governance Blog on October 15, 2010 (boomark / email).