Download This PaperExecutive Accountants and the Reliability of Financial Reporting
Management Science, forthcoming
56 Pages Posted: 19 Aug 2017 Last revised: 28 Apr 2020
Date Written: February 6, 2020
Abstract
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 CFO or CEO. 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. Further, we caution future research to consider which data is most appropriate in the context of each research question.
Keywords: executive accountant; executive officer disclosures; chief accounting officer; controller; restatements; accrual quality; material weaknesses; governance
JEL Classification: M12, M41
Suggested Citation: Suggested Citation