（2001）The Disposition of Audit-Detected Misstatements：An Examination of Risk and Reward Factors and Aggregation Effects（Discussion）.pdfVIP

Discussion of The Disposition of Audit-Detected Misstatements: An Examination of Risk and Reward Factors and Aggregation Effects FRED PHILLIPS, University of Saskatchewan 1. Introduction I am pleased to discuss Professor Brauns paper on auditors decisions to book or waive audit-detected misstatements. This area of research should be of interest to a wide audience: auditors, financial statement preparers, regulators, and other financial statement users. For auditors, the research promises to develop an understanding of the factors that affect decision making in one of the most important stages of finan- cial statement audit completion — the evaluation of audit-detected misstatements. For financial statement preparers, regulators, and other users, this study should lead to greater understanding of the potential discretion available to management and auditors when finalizing financial statements, and more importantly it suggests when that discretion, or what Kinney (2000,221) calls wiggle room, is likely to be exer- cised or not exercised . Finally, this study contributes to academic pursuits by extending research that has involved audit decisions outside the book-or-waive context, as I describe later. My discussion of the paper proceeds as follows. In section 2, 1 review the pro- fessional context in which book-or-waive decision making occurs, with somewhat of a Canadian fiavor. In section 3, 1 comment on the conceptual framework presented in Brauns study. In section 4, 1 discuss some specifics related to the experiment and the interpretation of results . Finally, in section 5, 1 conclude with suggestions for future research that were not mentioned by Braun. 2. The professional context Braun indicates that the auditors in her study were guided by U.S . standards, which recommend that detected misstatements be evaluated both individually and