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There are plenty of good reasons to make sure your finance department is properly staffed, but now you can add another one to the list: Your job may depend on it.
Material weaknesses may be linked to CFO turnover. Around 22% of US-listed companies that reported no material weaknesses on their financial statements in the past 12 months through June had CFO turnover, the Wall Street Journal reported, citing data from Hudson Labs. But that percentage rises to 28% for US-listed companies that had material weaknesses due to a lack of accounting staff in the past 12 months.
Over the past couple of years, some large companies have changed CFOs in the wake of problems related to a shortage of accounting staff, according to the Wall Street Journal. Contract manufacturer Sanmina replaced CFO Kurt Adzema last year after a lack of finance personnel contributed to its over- and underestimating revenues, leading to restatements. Tupperware CFO Mariela Matute resigned following several months of accounting issues at the company, including delays in reporting quarterly and annual results and potentially understating its income during 2020 through 2022. And Advance Auto Parts replaced CFO Jeff Shepherd following reporting delays.
For the past three years, material weaknesses attributed to the accounting shortage have been on the rise. In the past 12-month period, Hudson Labs data shows, 34.4% of companies with material weaknesses said a lack of accounting staff has been a factor. That’s up from 32.6% in the period ending in June 2023 and 30% in the period ending in June 2022. (However, it’s still well below the high of 40.2%, which occurred in the 2019–20 period.)