State sponsors of terrorism disclosure and SEC financial reporting oversight

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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Metadata

Work Title State sponsors of terrorism disclosure and SEC financial reporting oversight
Access
Open Access
Creators
  1. Robert Hills
  2. Matthew Kubic
  3. William J. Mayew
Keyword
  1. Comment letters
  2. Financial reporting oversight
  3. Independence
  4. SEC
  5. Terrorism
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Journal of Accounting & Economics
Publication Date August 21, 2021
Publisher Identifier (DOI)
  1. https://doi.org/10.1016/j.jacceco.2021.101407
Deposited July 25, 2022

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Version 1
published

  • Created
  • Added HKM_Accepted_PDF.pdf
  • Added Creator Robert Hills
  • Added Creator Matthew Kubic
  • Added Creator William J. Mayew
  • Published
  • Updated Work Title, Publisher Identifier (DOI) Show Changes
    Work Title
    • State sponsors of terrorism disclosure and SEC financial reporting oversight
    • State sponsors of terrorism disclosure and SEC financial reporting oversight
    Publisher Identifier (DOI)
    • doi.org/10.1016/j.jacceco.2021.101407
    • https://doi.org/10.1016/j.jacceco.2021.101407
  • Updated Keyword, Publication Date Show Changes
    Keyword
    • Comment letters, Financial reporting oversight, Independence, SEC, Terrorism
    Publication Date
    • 2021-08-01
    • 2021-08-21