The ICFR Process: Perspectives of Accounting Executives at Large Public Companies

63 Pages Posted: 8 Jan 2021 Last revised: 27 Dec 2022

See all articles by Eldar Maksymov

Eldar Maksymov

Arizona State University (ASU) - School of Accountancy

Jeffrey S. Pickerd

Brigham Young University - School of Accountancy

T. Jeffrey Wilks

Brigham Young University

Devin Williams

University of Oklahoma

Date Written: December 24, 2022

Abstract

The Sarbanes-Oxley Act charges management with the primary responsibility for
internal controls over financial reporting (ICFR). However, prior research tells us little about the
ICFR process from management’s perspective. We develop a theoretical model of the ICFR
process from management’s perspective and examine that model by surveying 145 and
interviewing 35 accounting executives at large U.S. public companies. Our primary finding is that
executives feel constrained in their ability to direct ICFR and hold perspectives that reflect these
constraints. Specifically, most executives feel compelled by auditors to follow the PCAOB’s
preferences even though executives believe these preferences often tend to distract management
and auditors from riskier areas. Executives also believe that audit committees’ involvement in
ICFR is too passive and that auditors’ assessments are sometimes too severe, prompting executives
to push back on auditors. Overall, executives strive to make decisions that are optimal for their
ICFR, but limited resources and other business conditions such as restructuring events and lack of
qualified personnel limit the effectiveness of their ICFR efforts. We discuss the implications of
our results for practitioners, regulators, and researchers.

Keywords: ICFR, internal controls, accounting executives, COSO, auditors, audit committees

JEL Classification: M4, M40, M41, M42, M48

Suggested Citation

Maksymov, Eldar M. and Pickerd, Jeffrey Scott and Wilks, Thomas Jeffrey and Williams, Devin, The ICFR Process: Perspectives of Accounting Executives at Large Public Companies (December 24, 2022). Available at SSRN: https://ssrn.com/abstract=3733945 or http://dx.doi.org/10.2139/ssrn.3733945

Eldar M. Maksymov (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Jeffrey Scott Pickerd

Brigham Young University - School of Accountancy ( email )

Provo, UT 84602
United States

Thomas Jeffrey Wilks

Brigham Young University ( email )

School of Accountancy
526 Tanner Building
Provo, UT 84602 84602
United States
801-422-3930 (Phone)
801-422-0621 (Fax)

HOME PAGE: http://marriottschool.byu.edu/directory/details?id=5337

Devin Williams

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

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