Good accounting reflects good leadership

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A study from Concordia University’s John Molson School of Business reveals that how accounting is employed reflects the kind of leadership executed in organizations. Specifically, firms that are not inclined to revising publicly released financial statements have well-governed accounting strategies, reflecting their good governance.

After comparing the management practices of 127 Canadian companies that announced financial restatements to an equal number of firms that did not submit restatements over a nine-year period, the researchers have found out that those companies that revised financial statements had less independent mistake and hired fewer prominent auditors. Furthermore, the companies that have undergone financial restatements are also more likely to change corporate leadership.


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This trend has brought researchers to a conclusion that accounting errors and financial restatements reflect organizational problems. “When these firms make changes to pre-restatement management and external auditors, that signals that they are dealing with their internal agency problems. They are trying to mimic the governance practices of nonrestating firms in what’s likely an attempt to improve their public image,” says the study’s co-author, Lawrence Kryzanowski.

Researchers believe that the result of the study is useful for investors and stakeholders. It was recently published in the Journal of Corporate Finance.


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As the Chief Financial Officer of United Technologies Corporation-Hamilton Sundstrand Division, Eric Visselli manages the company’s finances and leads a team of finance professionals. Follow this Twitter page to get relevant information on financial leadership.