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Public Accounting Experience and the Remediation of Material Internal Control Weaknesses

50 Pages Posted: 20 Apr 2017  

Andrew Bird

Carnegie Mellon University

Clive S. Lennox

University of Southern California

Chan Li

University of Pittsburgh - Katz Graduate School of Business

Thomas G. Ruchti

Carnegie Mellon University - David A. Tepper School of Business

Date Written: April 19, 2017

Abstract

Our study investigates the potential benefits of public accounting experience to auditee companies. We find companies hire more employees with public accounting experience after they receive adverse opinions on their internal controls. This result is particularly strong for companies whose material internal control weaknesses are related to personnel issues. We also find that internal control opinions improve significantly after companies hire more employees with public accounting experience. We conclude that employees with prior experience in public accounting help companies to improve their internal controls over financial reporting.

Suggested Citation

Bird, Andrew and Lennox, Clive S. and Li, Chan and Ruchti, Thomas G., Public Accounting Experience and the Remediation of Material Internal Control Weaknesses (April 19, 2017). Available at SSRN: https://ssrn.com/abstract=2955306

Andrew Bird

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Clive Lennox (Contact Author)

University of Southern California ( email )

Los Angeles, CA 90089
United States

Chan Li

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Thomas Ruchti

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

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