TY - JOUR
T1 - State sponsors of terrorism disclosure and SEC financial reporting oversight
AU - Hills, Robert
AU - Kubic, Matthew
AU - Mayew, William J.
N1 - Funding Information:
We appreciate helpful comments from James Hansen and Shelly Luisi from the SEC Division of Corporation Finance, Terrence Blackburne (referee), Jim Cox, Wayne Guay (editor), Caleb Rawson (discussant), Mani Sethuraman, Katherine Schipper, Rodrigo Verdi and workshop participants at Baruch College, Duke University, Harvard University, University of Miami Webinar Series, University of Virginia, the Southeast Summer Accounting Research Conference hosted at Georgia Tech and the 2020 FARS Midyear Meeting. We would like to thank Jonathon Weber of Marathon Studios for providing payroll data at www.federalpay.org.
Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/8
Y1 - 2021/8
N2 - We examine whether SEC effort to review state sponsors of terrorism (SST) disclosure negatively influences financial reporting oversight. Using comment letter inquiries about SST to measure effort, we find the likelihood that the SEC fails to identify a financial reporting error increases when comment letters reference SST. Consistent with SST disclosure review crowding out financial reporting oversight, comment letters referencing SST are less likely to mention accounting, non-GAAP, and MD&A issues. These effects are unique to SST as we find comment letter references to non-SST issues complement financial reporting oversight. Data obtained through a Freedom of Information Act request reveals a temporal shift in the occupational mix of SEC reviewers towards (away from) lawyers (accountants) that coincides with an increased focus on SST. Path analysis reveals that accountants (lawyers) are more (less) likely to detect errors and comment on financial reporting topics, with an indirect path through SST exacerbating these effects.
AB - We examine whether SEC effort to review state sponsors of terrorism (SST) disclosure negatively influences financial reporting oversight. Using comment letter inquiries about SST to measure effort, we find the likelihood that the SEC fails to identify a financial reporting error increases when comment letters reference SST. Consistent with SST disclosure review crowding out financial reporting oversight, comment letters referencing SST are less likely to mention accounting, non-GAAP, and MD&A issues. These effects are unique to SST as we find comment letter references to non-SST issues complement financial reporting oversight. Data obtained through a Freedom of Information Act request reveals a temporal shift in the occupational mix of SEC reviewers towards (away from) lawyers (accountants) that coincides with an increased focus on SST. Path analysis reveals that accountants (lawyers) are more (less) likely to detect errors and comment on financial reporting topics, with an indirect path through SST exacerbating these effects.
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U2 - 10.1016/j.jacceco.2021.101407
DO - 10.1016/j.jacceco.2021.101407
M3 - Article
AN - SCOPUS:85106410036
SN - 0165-4101
VL - 72
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
M1 - 101407
ER -
