Executive Accountants and the Reliability of Financial Reporting

2020 ◽  
Author(s):  
Adrienne Rhodes ◽  
Dan Russomanno
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Research Question ◽  
Positive Association ◽  
Chief Executive ◽  
Future Research ◽  
Chief Financial Officer ◽  
Accrual Quality ◽  
Material Weaknesses ◽  
Executive Officers

Using hand-collected data from mandatory disclosures of executive officers, we examine financial reporting outcomes associated with delegating significant accounting responsibilities to an executive accountant, not concurrently serving as the chief financial officer or chief executive officer. We find executive accountants are associated with a significant reduction in the likelihood of restatement. Moreover, we find evidence of a positive association between executive accountants and accrual quality and faster remediation of material weaknesses in internal control when an executive accountant is present. Taken together, this evidence is consistent with more reliable financial reporting at firms with an executive accountant. In contrast, accountants identified in commonly used datasets (i.e., Execucomp or BoardEx) are not consistently associated with the reliability of financial reporting. We highlight the significant differences between datasets, largely attributable to the objectives and sources of the underlying data. We conclude that Execucomp and BoardEx are not substitute datasets for the executive officers disclosed in firms’ 10-K and proxy statement filings. Furthermore, we caution future research to consider which data are most appropriate in the context of each research question. This paper was accepted by Shiva Rajgopal, accounting.

scholarly journals Causality and multidimensionality of internal controls: Impact on organizations

2011 ◽  
Vol 8 (2-5) ◽  
pp. 502-515
Author(s):  
Joshua Onome Imoniana ◽  
Verônica Moreira Costa ◽  
Mariana Araujo ◽  
Luiza Helena Pereira Alberto ◽  
Patrícia P. Alves
Keyword(s):  
New York ◽  
Financial Reporting ◽  
Internal Control ◽  
Response Rate ◽  
Research Question ◽  
Internal Controls ◽  
Causal Effects ◽  
Chief Financial Officer ◽  
Final Response ◽  
Final Response Rate

This study analyzes the managers’ (Chief Financial Officer (CFO)) perception of impact of implementation of internal controls. It investigates the causes of adoption in the multidimensionality of internal control of the Brazilian companies traded in the New York Stock market. A survey sent to the CFOs of the 70 companies listed in the NYSE collected empirical data from these companies. The final response rate was 15.16 %. The study uses partial least squares modeling for statistical analysis to test the research question. Our empirical evidence supports the hypotheses that “the greater the level of multidimensionality of controls in an organization the lower the level of causal effects and damage to the control environment. Based on work performed, one is able to infer that overall, there is a significant relationship between causal effects on operating activities, financial reporting and compliance in relation to the multidimensionality of internal controls, thus, when there are uncommon features, depending on the level of multidimensionality special attention should be paid to the causes of adoption of controls to track risks posed to business.

Implied Tradeoffs of Chief Financial Officer Accounting Expertise: Evidence from Firm-Manager Matching

2020 ◽  
Author(s):  
Darren Bernard ◽  
Weili Ge ◽  
Dawn Matsumoto ◽  
Sara Toynbee
Keyword(s):  
Financial Reporting ◽  
Chief Executive Officers ◽  
Chief Executive ◽  
Management Team ◽  
Senior Management ◽  
Chief Financial Officer ◽  
Ex Post ◽  
Key Skills ◽  
Accounting Expertise ◽  
Executive Officers

We present evidence that although individuals with accounting expertise bring key skills to the financial reporting responsibilities of the chief financial officer (CFO) position, they tend to lack educational and career experiences relevant to nonaccounting responsibilities (e.g., operations and strategy). Assuming boards’ perceptions of CFO accounting expertise are correct on average, we provide evidence of tradeoffs of CFO accounting expertise by examining how differences in CFO backgrounds shape executive employment decisions. Firms with greater demand for nonaccounting expertise are less likely to hire an accounting expert CFO, consistent with ex ante firm-manager matching. Ex post, significant declines in firm-manager fit predict CFO turnover and other compensating changes in the composition of the senior management team. Accounting expert CFOs are also less likely to become chief executive officers, suggesting that CFO experience does not fully mitigate these tradeoffs. Collectively, the results suggest important tradeoffs inherent to CFO accounting expertise that shape the structure of the senior management team. This paper was accepted by Suraj Srinivasan, accounting.

Audit Fees after Remediation of Internal Control Weaknesses

2011 ◽  
Vol 25 (1) ◽  
pp. 87-105 ◽  
Author(s):  
Vishal Munsif ◽  
K. Raghunandan ◽  
Dasaratha V. Rama ◽  
Meghna Singhvi
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Audit Fees ◽  
Internal Controls ◽  
Future Research ◽  
First Year ◽  
Section 404 ◽  
The Third ◽  
Material Weaknesses ◽  
Audit Fee

SYNOPSIS: In this study, we examine audit fees for SEC registrants that remediate previously disclosed material weaknesses in internal control. We find that remediating firms have lower audit fees when compared to firms that continue to report material weaknesses in internal control. However, the remediating firms continue to pay, in the year of remediation as well as one and two years subsequent to remediation, a significant audit fee premium compared to firms that have clean Section 404 reports in each of the first four years. Firms that had an adverse Section 404 report only in the first year, but remediated the problems in year two and had clean Section 404 reports in years three and four, pay an audit fee premium of 32 (21) percent in the third (fourth) year when compared to firms that had clean Section 404 reports in each of the first four years. The results, thus, suggest that audit fees are “sticky” for firms that have material weaknesses in internal controls over financial reporting, and suggest some interesting questions for future research.

The Association between IT Material Weaknesses and Earnings Management

2017 ◽  
Vol 32 (3) ◽  
pp. 53-64 ◽  
Author(s):  
William G. Heninger ◽  
Eric N. Johnson ◽  
John R. Kuhn
Keyword(s):  
Earnings Management ◽  
Internal Control ◽  
Positive Association ◽  
Future Research ◽  
Significant Positive Association ◽  
Material Weakness ◽  
Public Companies ◽  
Financial Condition ◽  
Sarbanes Oxley ◽  
Material Weaknesses

ABSTRACT In this paper, we examine the relationship between (1) information technology-related internal control material weaknesses (ITMWs) as reported by public companies between 2004 and 2012, and (2) earnings management. Prior research suggests that companies with internal control deficiencies are more likely to manage earnings; however, no study has specifically examined the incremental effect of ITMWs on earnings management tendencies. Based on a sample of 268 firm-years of ITMWs disclosed by U.S. public companies in their annual SEC filings (pursuant to Section 404 of the Sarbanes-Oxley Act of 2002), we find a significant positive association between ITMWs and income-increasing abnormal accruals. In addition, we find a positive relation between poor financial condition and material weaknesses in these companies. These results are robust with respect to two control samples of firms with non-IT-related-only material weaknesses (non-ITMWs) and firms with no material weakness disclosures. Implications of these findings for investors, regulators, and future research are discussed.

scholarly journals CEO Overconfidence And The Effectiveness Of Internal Control Over Financial Reporting

2015 ◽  
Vol 32 (1) ◽  
pp. 81 ◽  
Author(s):  
Jong Eun Lee
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Chief Executive Officers ◽  
Negative Impact ◽  
Empirical Test ◽  
Chief Executive ◽  
Test Results ◽  
Negative Consequences ◽  
Executive Officers

<p>In this study, I investigate the association between overconfidence, a cognitive bias of chief executive officers (CEOs), and the existence of internal control weaknesses (ICWs). As suggested in the prior finance literature on the negative impact of CEO overconfidence on corporate policy, overconfident CEOs could disregard the importance of internal control over financial reporting (ICFR), which could negatively affect the firm’s investment for infrastructure to implement effective financial reporting information system (FRIS) and result in less reliable financial information. Empirical test results show that CEO overconfidence is positively associated with the existence of ICWs, particularly with ICWs related to insufficient accounting personnel or ineffective FRIS. Those ICWs subsequently lead to lower earnings quality, higher absolute value of discretionary accruals and lower quality of accruals. Furthermore, potentially negative consequences of CEO overconfidence to the effectiveness of ICFR could downgrade investors’ confidence in the credibility of financial statements.</p>

The Severity of Internal Controls over Financial Reporting Deficiencies: Differences among Types and Industries

2014 ◽  
pp. 55-77
Author(s):  
Tatiana Mazza ◽  
Stefano Azzali
Keyword(s):  
Information Technology ◽  
Financial Reporting ◽  
Internal Control ◽  
Service Industry ◽  
Listed Companies ◽  
Internal Controls ◽  
Service Companies ◽  
Finance Industry ◽  
Material Weaknesses ◽  
Fixed Assets

This study analyzes the severity of Internal Control over Financial Reporting deficiencies (Deficiencies, Significant Deficiencies and Material Weaknesses) in a sample of Italian listed companies, in the period 2007- 2012. Using proprietary data the severity of the deficiencies is tested for account-specific, entity level and information technology controls and for industries (manufacturing and services vs finance industries). The results on ICD severity is compared with one of the most frequent ICD (Acc_Period End/Accounting Policies): for account-specific, ICD in revenues, purchase, fixed assets and intangible, loans and insurance are more severe while ICD in Inventory are less severe. Differences in ICD severity have been found in the characteristic account: ICD in loan and insurance for finance industry and ICD in revenue, purchase for manufacturing and service industry are more severe. Finally, we found that ICD in entity level and information technology controls are less severe than account specific ICD in all industries. However, the results on entity level and information technology deficiencies could also mean that the importance of these types of control are under-evaluated by the manufacturing and service companies.

scholarly journals Toward a Working Model of Leadership in Nonprofit Sport Governance

2019 ◽  
Vol 33 (3) ◽  
pp. 189-202 ◽  
Author(s):  
Ian O’Boyle ◽  
David Shilbury ◽  
Lesley Ferkins
Keyword(s):  
Chief Executive Officers ◽  
Leadership Skills ◽  
Chief Executive ◽  
Future Research ◽  
Limited Attention ◽  
Study Approach ◽  
Working Model ◽  
Executive Officers ◽  
Scholarly Discourse

The aim of this study is to explore leadership within nonprofit sport governance. As an outcome, the authors present a preliminary working model of leadership in nonprofit sport governance based on existing literature and our new empirical evidence. Leadership in nonprofit sport governance has received limited attention to date in scholarly discourse. The authors adopt a case study approach involving three organizations and 16 participant interviews from board members and Chief Executive Officers within the golf network in Australia to uncover key leadership issues in this domain. Interviews were analyzed using an interpretive process, and a thematic structure relating to leadership in the nonprofit sport governance context was developed. Leadership ambiguity, distribution of leadership, leadership skills and development, and leadership and volunteerism emerged as the key themes in the research. These themes, combined with existing literature, are integrated into a preliminary working model of leadership in nonprofit sport governance that helps to shape the issues and challenges embedded within this emerging area of inquiry. The authors offer a number of suggestions for future research to refine, test, critique, and elaborate on our proposed working model.

Cognitive Impairment and Length of Stay in Acute Care Hospitals: A Scoping Review of the Literature

2021 ◽  
pp. 1-19
Author(s):  
Jonathan Plante ◽  
Karine Latulippe ◽  
Edeltraut Kröger ◽  
Dominique Giroux ◽  
Martine Marcotte ◽  
...  
Keyword(s):  
Cognitive Impairment ◽  
Length Of Stay ◽  
Acute Care ◽  
Scoping Review ◽  
Research Question ◽  
Positive Association ◽  
Well Being ◽  
Future Research ◽  
Care Hospital ◽  
The Impact

Abstract Older persons experiencing a longer length of stay (LOS) or delayed discharge (DD) may see a decline in their health and well-being, generating significant costs. This review aimed to identify evidence on the impact of cognitive impairment (CI) on acute care hospital LOS/DD. A scoping review of studies examining the association between CI and LOS/DD was performed. We searched six databases; two reviewers independently screened references until November 2019. A narrative synthesis was used to answer the research question; 58 studies were included of which 33 found a positive association between CI and LOS or DD, 8 studies had mixed results, 3 found an inverse relationship, and 14 showed an indirect link between CI-related syndromes and LOS/DD. Thus, cognitive impairment seemed to be frequently associated with increased LOS/DD. Future research should consider CI together with other risks for LOS/DD and also focus on explaining the association between the two.

CEO statements on racial inequity – (how) do they matter to shareholders?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pyemo Afego ◽  
Imhotep Alagidede
Keyword(s):  
Chief Executive Officers ◽  
Social Issues ◽  
Chief Executive ◽  
Future Research ◽  
Research Approach ◽  
Content Type ◽  
Racial Injustice ◽  
Communication Decisions ◽  
Executive Officers ◽  
The Impact

Purpose The purpose of this study is to explore how citizen protests against perceived acts of racial injustice impact on share prices of companies who weigh in on the protests. In particular, corporate statements that directly address the issues around the protests are identified and possible mechanisms underlying how these may impact shareholder value are discussed. Design/methodology/approach The authors first use a qualitative research approach of content and sentiment analysis to track how companies or their chief executive officers (CEOs) present their stance against racial injustice, as represented by their use of linguistic markers. Then, the authors use an event study methodology to assess the response from stock market participants. Findings The findings suggest that CEOs primarily convey their stance using language that is emotive and empathic. In addition, shareholders earn a significant abnormal return of 2.13%, on average, in the three days following the release of the statements. Research limitations/implications This study considered only US-listed companies. The sample size, also, is relatively small. Institutional and cultural differences across countries may also vary. Thus, future research could explore the extent to which the findings generalize to other contexts. Practical implications Results provide insights to top managers who communicate with various stakeholders on emotionally charged social issues. Findings also offer insights on the timing of trades for investors and arbitrageurs. Social implications Findings contribute to the understanding of corporate behaviour in times of social upheaval. Insights from the study may also be used to inform corporate communication decisions about important social issues. Originality/value This study brings into focus the role that affective appeal and moral emotion can play in evoking motivation for corporate activism, and the impact that this has on investor opinions’ formation process.

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