A Study of the Consensus on Disclosure Among Public Accountants and Security Analysts.

Abstract This article focuses on a study that developed an empirical evidence concerning the adequacy of disclosure in published corporate annual reports of the U.S. Disclosure is the process through which an entity communicates with the outside world. The significance of proper and adequate corporate disclosure cannot be overemphasized in a free economy where the market allocates the resources to different sectors of the economy. Lack of adequate disclosure can create ignorance in the securities market and can result in misallocation of resources in the economy. The U.S. Congress realized the importance of adequate disclosure and its need in protecting investors' interests when it passed the Securities Act of 1933. In fact, the Securities Act has often been called a disclosure statute. However, the literature in accounting suggests that the present corporate disclosure practices are not satisfactory. Investors and their counselors are dissatisfied with published corporate reports and they often resort to sources other than corporate financial statements for needed information.