Events

Accounting Seminar

Speaker:
Dr. Yanju Liu
Assistant Professor of Accounting
School of Accountancy
Singapore Management University

Abstract:

In this study, we examine whether and how a firm’s in-house human capital investment in accounting affects its financial reporting quality. We argue that firms with a better-staffed accounting department exhibit higher financial reporting quality through a more effective financial reporting system, which reduces both the unintentional reporting errors and the intentional misstatements. Using the number of employees working in a firm’s accounting department as a proxy for its in-house human capital investment in accounting, we find that firms with larger in-house accounting departments (i) have better accruals quality; (ii) are less likely to restate; and (iii) report fewer material weaknesses in internal control. Our results also show that firms with higher levels of in-house human capital investment in accounting incur significantly lower audit fees. Overall, our findings suggest that the investment in in-house accounting department improves firms’ financial reporting quality