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    The Effect of CEO Social Influence Pressure and CFO...
    research summary posted April 19, 2017 by Jennifer M Mueller-Phillips, tagged 14.0 Corporate Matters, 14.05 Earnings Targets and Management Behavior, 14.06 CFO Tenure and Experience 
    The Effect of CEO Social Influence Pressure and CFO Accounting Experience on CFO Financial Reporting Decisions
    Practical Implications:

    This study provides direct testing of the effects of two forms of CEO social influence pressure on actual CFO’s reporting decisions. Examining such pressures improves the overall understanding of an individual’s decision to engage in dysfunctional behavior, which can inform auditors and audit committee members who provide oversight of the financial reporting process and have responsibility for mitigating the risk of financial misreporting. 


    Bishop, C. C., F. T. DeZoort and D. R. Hermanson. 2017. The Effect of CEO Social Influence Pressure and CFO Accounting Experience on CFO Financial Reporting Decisions. Auditing: A Journal of Practice and Theory 36 (1): 21 – 41.

    accounting manipulation, chief financial officer, chief executive officer, compliance pressure, obedience pressure, social influence pressure, and accounting experience.
    Purpose of the Study:

    CFOs play critical stewardship roles related to financial reporting quality and a prominent and increasing role in accounting manipulations, particularly in conjunction with their CEO. This study examines how CEO pressure on the CFO and CFO accounting experience influence public company CFOs’ financial reporting judgments and decisions. 

    Design/Method/ Approach:

    The authors conducted an experiment involving a hypothetical CFO’s earnings manipulation decision. Using a between-subjects manipulation, they utilize three levels of CEO pressure (a control group where the CEO does not pressure the CFO, a compliance pressure group where the CEO asks the CFO to revise an estimate, and an obedience pressure group where the CEO tells the CFO to revise an estimate). 

    • The authors find that two different forms of CEO social influence pressure (obedience pressure and compliance pressure) are both effective in motivating some CFOs to misreport, with no significant difference between the two.
    • The authors find that the CFOs do not abdicate the financial reporting responsibility under pressure, despite predictions from the obedience theory; instead, the CFOs acknowledge that they still have ultimate responsibility.
    • The authors find an inverse relation between CFO accounting experience and revision of the initial adjustment, consistent with accounting experience empowering CFO resistance to pressure. 
    Corporate Matters
    CFO Tenure & Experience, Earnings Targets & Management Behavior