CFO Power and Audit Quality

Due to their primary responsibilities over the financial reporting process, chief financial officers (CFOs) accumulate critical knowledge, and therefore power, within organisations. We examine whether such powerful CFOs use their influence to increase or decrease audit quality. Using a wide range of proxies for audit quality and a comprehensive measure of CFO power, we find that powerful CFOs are associated with lower levels of audit quality, suggesting that powerful CFOs pursue an agenda of self‐interest. Our results are robust to alternative specifications of our variables, including endogeneity. As a result of our findings, we contribute not only to the academic literature but also provide useful research outcomes, such as aiding with legislation to strengthen corporate governance structures within firms to monitor such powerful CFOs.

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Publication Details

Journal
Australian Accounting Review
Published
2024-10-20
DOI
https://doi.org/10.1111/auar.12436
Citations
3
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
2.84
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article

CFO Power and Audit Quality

Nigar Sultana, Harjinder Singh, Ariful Islam, Ayoob Alyafai
3 citations
Australian Accounting Review
Auditing, Earnings Management, Governance
2.84
article

CFO Power and Audit Quality

Nigar Sultana, Harjinder Singh, Ariful Islam, Ayoob Alyafai
article en
3 citations

Abstract

Due to their primary responsibilities over the financial reporting process, chief financial officers (CFOs) accumulate critical knowledge, and therefore power, within organisations. We examine whether such powerful CFOs use their influence to increase or decrease audit quality. Using a wide range of proxies for audit quality and a comprehensive measure of CFO power, we find that powerful CFOs are associated with lower levels of audit quality, suggesting that powerful CFOs pursue an agenda of self‐interest. Our results are robust to alternative specifications of our variables, including endogeneity. As a result of our findings, we contribute not only to the academic literature but also provide useful research outcomes, such as aiding with legislation to strengthen corporate governance structures within firms to monitor such powerful CFOs.

Australian Accounting ReviewVol. 34(4)
Curtin University (AU), Taibah University (SA), University of Business and Technology (SA), College of Business Administration (LV)
Openalex Percentile: Top 8%
Auditing, Earnings Management, Governance
2.84
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