The Effect of CEO Social Influence Pressure and CFO Accounting Experience on CFO Financial Reporting Decisions

The purpose of this study is to test the effects of inappropriate CEO social influence pressure and CFO accounting experience on CFOs' reporting judgments and decisions. Specifically, we use a sample of 69 highly experienced public company CFOs to evaluate the extent that inappropriate complian...

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Bibliographic Details
Published in:Auditing : a journal of practice and theory 2017-02, Vol.36 (1), p.21-41
Main Authors: Bishop, Carol C., DeZoort, F. Todd, Hermanson, Dana R.
Format: Article
Language:English
Subjects:
Accounting
Behavioral decision theory
Chief executive officers
Chief information officers
Compliance
Financial reporting
Public Company Accounting Reform & Investor Protection Act 2002-US
Studies
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Summary:The purpose of this study is to test the effects of inappropriate CEO social influence pressure and CFO accounting experience on CFOs' reporting judgments and decisions. Specifically, we use a sample of 69 highly experienced public company CFOs to evaluate the extent that inappropriate compliance or obedience pressure from the CEO to revise financial reporting to meet an earnings target affects CFO revision decisions. The results indicate that compliance pressure (a request) and obedience pressure (an order) from the CEO significantly (and similarly) increase CFO willingness to revise their initial inventory adjustments. Although both types of pressure from CEOs impact CFOs' financial reporting decisions, compliance pressure did not create increased levels of perceived pressure. The results also reveal an inverse relation between CFO accounting experience and revision of the initial estimate. Finally, CFOs who acquiesce to CEO pressure maintain their personal responsibility for the adjustment, contrary to obedience theory, but consistent with the intent of SOX Section 302 certification requirements.
ISSN:0278-0380
1558-7991
DOI:10.2308/ajpt-51507