Do Differences in CFO Audit Experience Matter to Financial Statement Quality? A Canadian Perspective

Abstract

The Canadian qualification process for professional accountants affords an opportunity to study the effects of audit experience/education on several performance metrics. We analyze and classify the audit experience and education of chief financial officers (CFOs) of Canadian companies for the period 2006 – 2021. We then test the associations between audit experience and CFO education and several performance metrics, including financial performance, operational performance, quality of ESG disclosures, earnings quality, strength of internal control, and financial statement reliability (i.e., the likelihood of restating annual financial statements). We find that revenue is higher when a company’s CFO has an MBA degree than when a company’s CFO does not have an MBA degree. However, both internal control effectiveness and financial statement reliability are higher when a company’s CFO has audit experience than when a company’s CFO does not have audit experience, especially when the CFO has an MBA.

Keywords: chief financial officer, CFO, MBA, CPA, corporate reporting

JEL Classification: M41, M42, M51