When Accountants Leave: The Reporting Risk Firms Cannot Afford to Ignore
Staff departures from an accounting department are not just a talent problem. According to a new peer-reviewed study from the University at Buffalo School of Management, they are a measurable predictor of financial reporting failure, including restatements, late filings, and weaker management forecasts. For any firm that holds digital assets and must apply FASB's fair-value rules under ASC 350-60 or prepare crypto financial statements under IFRS, the findings carry an additional layer of urgency.
What the Research Actually Found
Researchers at the UB School of Management analyzed accounting department workforce data for more than 1,600 US firms over the period 2008 to 2021. The employment data came from Revelio Labs, which structures information derived from more than 500 million LinkedIn profiles into proprietary datasets that allow researchers to track individual career moves at scale.
Three types of turnover, one consistent signal
The team tracked three distinct workforce patterns: employee churn (departures replaced by new hires), net departures (headcount shrinking), and net hiring (headcount growing). All three variants showed associations with downstream reporting problems, but churn, the constant cycling of staff, produced the clearest signal. Replacing experienced staff with less experienced joiners dilutes institutional knowledge even when headcount stays the same.
The reporting problems the researchers measured were concrete: financial statement restatements, delayed earnings announcements, and filings submitted late to the SEC. Beyond accuracy, higher accounting turnover correlated with larger external audit fees. Auditors, it appears, price in the risk that comes with a less stable reporting function.
Where the effect was strongest
Two conditions amplified the relationship between turnover and reporting quality. First, companies with more complex accounting operations showed a sharper effect. Second, the impact was more pronounced in geographic labor markets where qualified accountants are harder to recruit. When it is difficult to backfill a departing senior accountant quickly, the gap in capability persists longer and the reporting consequences are more severe.
"With fewer accountants entering the profession, losing qualified staff can put added pressure on employees and processes responsible for financial reporting," said Joshua Khavis, assistant professor of accounting and law at UB and a co-author of the study. His colleague Michael Dambra, Kenneth W. Colwell Chair of Accounting and Law at UB, added that tracking employee movements through platforms such as LinkedIn could help investors identify potential risks, particularly as employment data becomes more accessible through advances in data-capturing technology.
The Digital Asset Dimension
The study covers the full 2008-to-2021 sample period, which predates the widespread adoption of digital assets on corporate balance sheets. But its conclusions apply with particular force to firms that now carry cryptocurrency or other digital assets and must apply recently adopted accounting standards.
FASB ASC 350-60 and the fair-value reporting burden
The Financial Accounting Standards Board's Accounting Standards Update for digital assets, codified in ASC 350-60, requires US GAAP reporters to measure qualifying crypto assets at fair value each reporting period, with changes recognized in net income. That is not a mechanical exercise. It requires staff who understand both the accounting standard and the operational realities of digital asset markets: price sourcing, classification of assets that may or may not meet the standard's scope criteria, and the disclosure requirements that accompany fair-value measurement.
If the accountants who built that knowledge leave, the institutional memory leaves with them. A replacement hire, however capable in general accounting, will need time to get up to speed on FASB crypto fair value mechanics. During that gap, the risk of a misstated figure in the crypto financial statements rises sharply, exactly the pattern the UB study documents at a macro level.
IFRS reporters face a parallel challenge
Firms preparing financial statements under IFRS historically applied IAS 38 (intangible assets) or, in some cases, IAS 2 (inventories) to crypto holdings, a treatment that required significant judgment and was highly dependent on an accountant's understanding of the specific asset and the entity's business model. While the IASB has since issued narrow-scope amendments to provide more tailored guidance, the judgment-intensive nature of IFRS crypto assets accounting means that practitioner continuity matters even more than in a rules-based environment. When the people who made those original classification judgments are no longer in the building, recreating the rationale for prior-period treatment is time-consuming and error-prone.
For an overview of how IFRS crypto assets treatment is evolving across jurisdictions, see our roundup of global crypto policy shifts.
SEC Disclosure Requirements Are Shifting
The UB study notes that its findings carry regulatory implications at a moment when the Securities and Exchange Commission is reconsidering how companies report on their workforces. The SEC has been examining whether quarterly human capital disclosures should remain mandatory or whether companies should have the option to move to semi-annual reporting.
Why workforce data is becoming a financial risk indicator
The research suggests that investors and regulators could use publicly available employment data, including what individuals post on professional networking sites, as a leading indicator of reporting risk. That reframes workforce information from a soft HR metric into something closer to a financial risk signal. For audit committees and external auditors, it implies that monitoring accounting department stability should be part of pre-engagement planning and ongoing audit risk assessment, not a footnote in the management letter.
For firms with digital asset exposure, that monitoring task is compounded by the fact that ASC 350-60 and IFRS requirements are still relatively new. The pool of accountants with hands-on experience applying these standards remains small. Losing one or two of them from a team can represent a disproportionate share of the firm's total digital asset reporting capability.
Practical Implications for Accounting Firms and CFOs
The study's findings are observational rather than prescriptive, but they point toward several areas where firms can take action now.
Treat retention as a reporting control
Internal controls frameworks, whether built around COSO or another model, typically focus on processes and systems. The UB findings suggest that the stability of the people operating those controls deserves its own place in the risk register. A firm that documents its ASC 350-60 procedures meticulously but loses the people who built them is not as well-controlled as those procedures imply.
Succession planning for senior accounting roles, cross-training so that knowledge of digital asset accounting is held by more than one person, and structured offboarding processes that capture institutional knowledge before a departure are all practical responses. None of these requires new technology, only deliberate process design.
Audit fee exposure is real and quantifiable
The study's finding that higher accounting turnover correlates with larger audit fees has a direct budget implication. External auditors spend more time on substantive testing when they have less confidence in the reliability of the reporting function, and they price that work accordingly. For firms carrying digital assets, the audit of fair-value measurements is already a high-effort area. Layer accounting staff instability on top of that and the fee exposure compounds.
CFOs reviewing audit fee trends over the past few years may find a partial explanation in their own accounting department headcount data. If turnover has been elevated, addressing it is not only a workforce strategy but also a cost-management one.
Digital asset accounting software as a continuity tool
One partial mitigation is investing in digital asset accounting software that encodes the logic of ASC 350-60 or the relevant IFRS treatment directly into the workflow. When classification rules, fair-value sourcing, and disclosure templates are built into the system rather than held in a spreadsheet or in one person's head, a departing employee takes less institutional knowledge with them. The system becomes part of the control environment.
For an overview of how FASB's digital asset fair value rules are shaping accounting team workflows, see our piece on FASB's digital asset fair value rules and what they mean for accounting teams.
This does not eliminate the human-capital risk the UB study identifies. Software still requires skilled operators to configure it, review its outputs, and exercise judgment on edge cases. But it does reduce the surface area of knowledge that exists only in someone's memory.
Investors and audit committees: a new use for LinkedIn data
The research team's suggestion that investors track accounting department employee movements through professional networking platforms is not a fringe idea. Employment data aggregators already sell structured workforce analytics to institutional investors and credit analysts. For audit committees that want to get ahead of reporting risk, commissioning a periodic review of accounting department stability using available employment data is a low-cost, high-signal addition to the usual financial ratio analysis.
For firms with digital asset holdings, the relevant question is specific: are the people who understand FASB crypto fair value or IFRS crypto assets accounting still in the building?
Key Takeaways for Accounting Firms and CFOs
- The UB study covered more than 1,600 US firms across 2008 to 2021, finding that accounting department churn consistently preceded restatements, late filings, and less accurate forecasts.
- The effect was strongest at companies with complex accounting operations and in tight labor markets, both conditions that apply to firms carrying digital assets under ASC 350-60 or IFRS.
- Higher turnover also correlated with larger external audit fees, creating a direct cost impact beyond the reputational risk of a restatement.
- The SEC is reviewing workforce disclosure requirements, and the study's findings suggest employment data could become a standard part of financial risk monitoring by investors and regulators.
- Firms can respond by treating retention of digital-asset-literate accountants as a control, investing in documentation and cross-training, and considering whether their digital asset accounting software reduces single-person dependency.
Source: Accounting Today
Frequently Asked Questions
Does the UB study specifically cover digital asset accounting?
No. The sample period runs from 2008 to 2021, before digital assets became a significant balance sheet item for most US firms. However, the study's core finding, that complexity amplifies the reporting risk from accounting staff turnover, applies directly to any firm now navigating ASC 350-60 or IFRS crypto assets requirements, which represent some of the most technically demanding accounting work in a standard corporate finance function today.
How does accounting staff churn affect FASB ASC 350-60 compliance specifically?
ASC 350-60 requires firms to measure qualifying crypto assets at fair value at each reporting date, recognize changes in net income, and meet specific disclosure requirements. The standard demands both technical knowledge of the rule and practical familiarity with digital asset markets. When experienced staff leave, the people responsible for these tasks may lack the background to apply the standard correctly, which increases the risk of a material misstatement in the crypto line items on the financial statements.
What does the study say about audit fees?
The researchers found that higher accounting department turnover was associated with larger external audit fees. The likely mechanism is that auditors respond to a less stable reporting function by increasing substantive testing, which adds to the hours billed. For firms where the digital asset audit is already a cost center due to the complexity of fair-value procedures, additional staff instability compounds that exposure.
Could publicly available LinkedIn data really be used as a financial risk indicator?
The study used structured employment data derived from LinkedIn profiles, processed by Revelio Labs, to track accounting department movements across 1,600-plus firms. The researchers specifically suggest that investors and regulators could use similar publicly available data as an early-warning tool. Institutional investors already buy structured workforce analytics; the study provides academic grounding for treating that data as a proxy for financial reporting risk rather than just a business intelligence input.
What should an audit committee do with these findings right now?
Three immediate actions are worth considering. First, ask management to report on accounting department turnover, specifically among staff responsible for complex or specialist areas such as digital asset accounting, as part of the regular risk update. Second, review whether the external auditor's risk assessment reflects accounting headcount instability. Third, check whether key accounting procedures, including those for FASB crypto fair value measurement, are documented at a level of detail that survives a senior departure. If any of those three checks reveal a gap, that is a control deficiency worth addressing before the next filing cycle.