We investigate whether the characteristics of chief financial officers (CFOs) are associated with accounting errors (using accounting restatements as a proxy). We investigate several metrics of financial literacy similar to those suggested for members of audit committees by the NYSE‐NASD Blue Ribbon Committee. These metrics include years of work as a CFO, experience at another company, advanced degrees (like M.B.A.s), and professional certification (like a CPA). We use a logit model to test whether the likelihood of an earnings restatement is related to the above metrics of financial literacy (measured at the date of the original accounting error). Restating and non‐restating companies during the period 1997–2002 were matched on year, industry, and company size. Overall, our results are consistent with restatements being negatively associated with the CFO's financial expertise. Specifically, we find that companies whose CFOs have more work experience as CFOs, M.B.A.s, and/or CPAs are significantly less likely to restate their earnings.
The Financial Expertise of CFOs and Accounting Restatements
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Jagadison K. Aier, Joseph Comprix, Matthew T. Gunlock, Deanna Lee; The Financial Expertise of CFOs and Accounting Restatements. Accounting Horizons 1 September 2005; 19 (3): 123–135. doi: https://doi.org/10.2308/acch.2005.19.3.123
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