CFO bonuses and material weaknesses
Filed in archive Accounting by leon on October 22, 2007

What impact does it have on CFOs when the company admits it has screwed up and makes a material weakness disclosure under Section 404? Not real flash, according to a new study.
The study, The Effects of Internal Control Quality, CFO Characteristics, and Board of Director Strength on CFO Annual Compensation, examined 635 firms in 2005. The average CFO salary was $316,932, with an average bonus of $222,764. Five per cent were former audit partners, which seemed to give them a higher salary, and 13 per cent sat on other firms' boards.
The study found that when CFOs reported ineffective internal controls, they took a substantial pay cut because it hit their bonuses. Furthermore, it was particularly severe for those who were former audit partners or who served on the board.
All up, another piece of evidence to show CFOs are much more in the firing line post Sarbanes-Oxley. But with big rewards if they get through.
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Mr Wong
