Abstract
Purpose: This study investigates how Chief Financial Officers’ (CFOs) personal char- acteristics affect qualitative materiality decisions during the preparation of financial reporting. While materiality is a key principle in financial reporting, the subjective na- ture of qualitative judgments remains underexplored, particularly from the perspective of preparers rather than auditors. Methodology: Drawing on Upper Echelons Theory (UET), the study adopts a survey- based approach targeting 160 CFOs from IFRS-compliant, European-listed companies in France, Germany, Italy, and Spain. The survey captures CFOs’ weighting of quali- tative materiality factors using a Likert scale. Findings: Results reveal that CFO characteristics significantly affect the integration of qualitative materiality factors. Specifically, older, longer-tenured CFOs and those with prior audit experience are more inclined to integrate qualitative factors into finan- cial materiality decisions, reflecting a more conservative and risk-sensitive approach. Originality/value: The study shifts focus from auditors to financial statement prepar- ers, offering novel insights into how materiality judgments are shaped at the prepara- tory stage. By integrating Upper Echelons Theory (UET) into the context of materiality assessments, the research introduces a behavioral perspective that enhances the understanding of how executive characteristics shape accounting judgments. This approach expands the boundaries of behavioral accounting literature and provides new insights into the subjective dimensions of financial statement preparation. Practical implications: Findings have implications for standard setters, regulators, and corporate governance by emphasizing the role of CFO characteristics in ensuring consistent and transparent financial reporting. Understanding these behavioral dynamics can inform better training, policy design, and oversight mechanisms.
Keywords:materiality, CFOs characteristics, qualitative factors
