The Relative Influences of Officers and Auditors on Annual Report Textual Disclosures

64 Pages Posted: 30 Apr 2019

See all articles by Keith Czerney

Keith Czerney

University of Missouri-Columbia

Padmakumar Sivadasan

Tulane University - A.B. Freeman School of Business

Date Written: April 16, 2019

Abstract

We examine the relative influences of firm officers and external auditors on textual disclosures in the annual report. Using a sample of public companies that file XBRL-tagged financial statements with the SEC between 2011 and 2018, we find that external auditors have the strongest influence on Management’s Discussion and Analysis (MD&A) and financial statement footnote disclosures, followed by chief financial officers and then chief executive officers. We rule out the following possible alternative explanations for the external auditor’s significant influence on disclosures: auditor changes that coincide with other changes in financial reporting personnel; changes in underlying firm economics that compel disclosure change; and, audited information that is duplicated from the footnotes in MD&A. In additional analyses, we find that changing from a lower quality auditor to a higher quality auditor and changing between lower quality auditors are associated with greater changes in disclosures and that auditors’ relative influences tend vary depending on firm size. Our findings highlight the significant influence external auditors have on firm financial reporting that extends to textual disclosures.

Keywords: Disclosure, MD&A, Footnotes, Textual Analysis, Auditors, Chief Financial Officers, Chief Executive Officers

JEL Classification: D83, M41, M42, M48

Suggested Citation

Czerney, Keith and Sivadasan, Padmakumar, The Relative Influences of Officers and Auditors on Annual Report Textual Disclosures (April 16, 2019). Available at SSRN: https://ssrn.com/abstract=3376040 or http://dx.doi.org/10.2139/ssrn.3376040

Keith Czerney (Contact Author)

University of Missouri-Columbia ( email )

College of Business
Columbia, MO 65211
United States

Padmakumar Sivadasan

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

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