Executive Accountants and the Reliability of Financial Reporting

Adrienne Rhodes () and Dan Russomanno ()
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Adrienne Rhodes: Accounting Department, Tippie College of Business, University of Iowa, Iowa 52242
Dan Russomanno: School of Accountancy, Eller College of Management, University of Arizona, Arizona 85721

Management Science, 2021, vol. 67, issue 7, 4475-4504

Abstract: Using hand-collected data from mandatory disclosures of executive officers, we examine financial reporting outcomes associated with delegating significant accounting responsibilities to an executive accountant, not concurrently serving as the chief financial officer or chief executive officer. We find executive accountants are associated with a significant reduction in the likelihood of restatement. Moreover, we find evidence of a positive association between executive accountants and accrual quality and faster remediation of material weaknesses in internal control when an executive accountant is present. Taken together, this evidence is consistent with more reliable financial reporting at firms with an executive accountant. In contrast, accountants identified in commonly used datasets (i.e., Execucomp or BoardEx) are not consistently associated with the reliability of financial reporting. We highlight the significant differences between datasets, largely attributable to the objectives and sources of the underlying data. We conclude that Execucomp and BoardEx are not substitute datasets for the executive officers disclosed in firms’ 10-K and proxy statement filings. Furthermore, we caution future research to consider which data are most appropriate in the context of each research question.

Keywords: executive accountant; executive officer disclosures; chief accounting officer; controller; restatements; accrual quality; material weaknesses; governance (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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