Female Rank-and-File Accounting Employees and Internal Control Quality

Abstract

We use proprietary data on rank-and-file employees from a large sample to document a negative relation between the percentage of female rank-and-file accounting employees and firms’ propensity for internal control weaknesses. This relation is curvilinear. The effect is strong when female accountants are underrepresented, while the effect attenuates when gender diversity exceeds parity. We also find that a firm’s ineffective internal control predicts the future turnover of male rank-and-file accountants. Our study is the first to provide evidence that gender plays an important role at the level of rank-and-file employees in determining internal control quality.