The study tested the "prediction that auditors are willing to tolerate more error in disclosed numbers than in recognized numbers" and found that "information location influences reliability."

One experiment asked auditors how they would handle the underestimated cost of employee cost options. Some were told the error was on the company's income statement, and some were told the error was in a footnote only. Auditors were more likely to call for a correction when the error was in the income statement.

As the report states: "Even though recognition increases client resistance to correcting the misstatement, auditors view recognized misstatements as more material than disclosed misstatements, and therefore pressure the client more to correct recognized misstatements. Recognition also increases the amount of effort auditors expend making a correction decision."

The authors of the study -- Cornell's Mark Nelson and Robert Libby, and Bentley's James Hunton -- point out that "accounting and auditing standards do not directly address whether auditors' responsibilities for misstatement reduction should vary depending on information location."

The report concludes that "standard setters and regulators should consider clarifying auditor responsibilities in this area."

The 42-page report is titled "Recognition v. Disclosure and Auditor Misstatement Correction: The Cases of Stock Compensation and Leases" and was released on March 22.