Albrecht Anne 2016

Anne Albrecht’s Research on CFOs with Accounting Backgrounds Featured in Wall Street Journal

Providing above-average compensation to top executives with audit-firm experience can raise the risk of financial misstatements, according to Assistant Professor of Accounting Anne Albrecht.

November 01,  2018

By Elaine Cole

A combination of audit-firm experience and excess pay can bring out a “dark side” of accounting competence and raised the risk of misstatements, Anne Albrecht, assistant professor of accounting at the TCU Neeley School of Business, told The Wall Street Journal. Albrecht’s research on the subject was published in The Accounting Review.

“Accounting competence is good because they (top managers) are able to generate more reliable financial statements,” Albrecht told TheWall Street Journal. “But it’s bad because the knowledge of accounting procedures allows them to make the misstatements in the first place, and their knowledge of the auditing process allows them to hide it.”

Albrecht is featured in the WSJ’s CFO Journalarticle written by Tatyana Shumsky, “The ‘Dark ‘Side” of Managers with Audit Experience.”

According to Albrecht’s research, companies that gave top managers above-average compensation and whose executives had an audit-firm background were about 30 percent more likely than those with lower-paid counterparts to misstate financial results.

Moreover, executives with an audit background were more likely to engender trust from the company’s current auditors, resulting in a higher rate of clean audit opinions. 

“That shared background generates trust so that auditors aren’t necessarily as skeptical of management as perhaps they should be,” Albrecht told the WSJ.

Read the full article on The Wall Street Journal CFO Journal website, www.wsj.com/news/cfo-journal or click here.