The role of specialists in financial reporting: Evidence
from pension accounting
Published online: 1 June 2017
Springer Science+Business Media New York 2017
Abstract The increasing use in financial reporting of estimates prepared by specialists has
raised questions on the role these specialists play in financial reporting quality. In the setting
of defined-benefit pension accounting—where the pension actuary is involved as a spe-
cialist—I examine whether pension sponsors with strong incentives to improve reported
funding status pressure their actuaries for aggressive (obligation-reducing) assumptions.
Among these sponsors, I find that those that are economically important clients of their
actuaries use more aggressive discount rates than less important clients of the same actuary.
Sponsors incentivized to inflate reported funding status but constrained from doing so also
tend to seek out new actuaries. Discount rates become more aggressive after switches.
These findings suggest that specialists are used to facilitate aggressive reporting. They also
indicate that auditors—who are charged with evaluating specialists’ independence before
relying on their work—may have difficulty implementing this guidance in practice.
JEL classifications M41 Accounting
M48 Government Policy and
The increasing use of complex estimates in financial reporting poses a challenge for
auditors and financial statement users (Christensen et al. 2012). Auditors argue that it
Rev Account Stud (2017) 22:1261–1306
Electronic supplementary material The online version of this article (doi:10.1007/s11142-017-9404-4)
contains supplementary material, which is available to authorized users.
* Divya Anantharaman
Rutgers Business School, 1 Washington Park, #916, Newark, NJ 07102, USA