| Abstract: | Considerable controversy has arisen over auditor involvement with interim financial statements. The Securities and Exchange Commission (SEC) has taken an aggressive stance towards the advocacy of auditor involvement. The Commission cited anticipated improvements in the predictive capacity of interim data as justification for such advocacy. This study found evidence contrary to the expectations of the SEC. Earnings per share forecast errors generated through naive predictor models did not differ significantly when auditor involvement was introduced as in input segregation criterih. Accordingly, the data suggest that auditor involvement does not affect the predictive content of interim statements. In view of the finding of the study the author recommends a reassessment of the cost/benefit structure associated with auditor involvement in interim financial statements. |
