The SEC XBRL mandate enables the gathering of accounting numbers to be fully automatic in a database-like manner that provides vast opportunities for financial analysis. Using this functionality, this study proposes a simple analytical prescreening measure that uses abnormal digit distributions at the firm-year level to identify firms suspected of having managed earnings. On average, we find that the constructed measure indicates a greater amount of irregularities in the reported accounting numbers of firms with higher incentives to engage in earnings management. The suggested XBRL-enhanced digit analysis approach may provide the SEC and investors a simple measure to flag financial reports carrying a higher probability of human interaction.
JEL Classifications: C10; M41; M43.
Data Availability: Data used in this paper are publicly available. The analytical prescreening VBA-Tool is available upon request. A description of the tool is available; see Appendix B.