No rose without a thorn: Corporate teamwork culture and financial statement misconduct

Abstract

This study investigates the dark side of corporate teamwork culture on firms’ financial reporting behaviors. We used a novel corporate culture measurement developed by machine learning approach (Li et al., 2021), and calculated Benford Score (Amiram et al., 2015) as the proxy for financial misconduct in firms’ annual financial statements from 2003 to 2021. We find a positive association between a company’s emphasis on teamwork culture and financial statement misconduct; this association is more pronounced when a firm reports no internal control weakness. Additional analyses show that firms with stronger teamwork cultures are more likely to engage in financial statement misconduct when they use a Big 4 accounting firm as an auditor, or they are smaller in size. This research contributes to the collusive fraud literature by identifying a mechanism by which accounting personnel might be complicit and/or participate in financial statement misconduct or fraud. Our findings may be of interest to those tasked with corporate governance in identifying and preventing financial statement fraud.