Determinants of the Severity of Legal and Employment Consequences for CPAs Named in SEC Accounting and Auditing Enforcement Releases

Daniella Juric, Brendan O’Connell (), Michaela Rankin and Jacqueline Birt
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Daniella Juric: RMIT University
Brendan O’Connell: RMIT University
Michaela Rankin: Monash University
Jacqueline Birt: University of Queensland

Journal of Business Ethics, 2018, vol. 147, issue 3, No 5, 545-563

Abstract: Abstract This study investigates the impact of Securities and Exchange Commission (SEC) enforcement actions on individuals holding Certified Public Accountant (CPA) accreditation. While prior research has investigated both the characteristics of companies that have been investigated by the SEC and litigation against audit firms, it has not addressed the ways in which SEC investigations impact CPAs. Using a sample of 262 CPAs, we find that the most common CPA breach was associated with overstating revenues/income or earnings. The study finds serious consequences for CPAs in terms of employment restrictions and SEC actions, incorporating suspension, which is often permanent. We find that the primary factors relating to the severity of actions by the SEC is whether the CPA intentionally breached the professional code of conduct, the age of the CPA, whether the CPA is still a member of the AICPA with CPA status and whether the CPA was operating as an external auditor or in a corporate accounting role. Our findings have implications for accounting practitioners, the AICPA and boards of directors.

Keywords: Accounting and auditing enforcement releases (AAERs); CPAs; Institutional theory; SEC litigation; Corporate fraud (search for similar items in EconPapers)
JEL-codes: K23 K41 M48 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10551-015-2956-y

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