IT-capable employees improve relevance and timeliness of financial reporting, study finds

LAWRENCE — While much of the conversation around financial reporting quality tends to focus on auditors, systems or regulations, there is another area often overlooked but perhaps equally important: human capital. Specifically, the importance of having employees with strong IT capabilities.

“As financial reporting becomes increasingly digital, we believe our findings can inform hiring, training and talent strategy decisions, as well as encourage policymakers and educators to support the development of IT skills in the financial workforce,” said Adi Masli, Larry D. Horner/KPMG Professor and Ernst & Young Academic Resource Center Professor at the University of Kansas School of Business.

His findings are revealed in “Access to IT-capable employees and the relevance of financial information.” This paper examines IT-capable employees’ role in the production process of financial information, deducing that enhanced management of raw data during this process decreases technical errors and increases data processing speed, thus allowing such information to be more relevant and useful to the users of financial statements.

The research is published in the Journal of Accounting and Public Policy.

Co-written by J. Philipp Klaus of the University of Texas at Arlington and Pradeep Sapkota of the University of North Texas, the paper defines “IT capable” as employees who have strong information technology skills and experience. This includes capabilities such as data management and analytics, IT systems integration and leveraging technology to support financial reporting.

“Employees play an essential role in producing high-quality financial reports, and those with strong IT skills are especially valuable due to the increasing reliance on technology and systems like XBRL (eXtensible Business Reporting Language) in the reporting process,” he said.

Masli noted that access to IT-capable personnel enhances financial reporting in two key ways. First, these employees help improve the XBRL tagging process by reducing errors and complexity. Such skills are crucial not only during initial software implementation but also in maintaining and refining the system over time. Second, IT-skilled employees contribute to the proper functioning of the company’s information systems, which results in more consistent and accurate data.

“Ultimately, this leads to more timely and reliable financial disclosures,” he said.

Since companies do not publicly divulge information about the workforce’s IT competency or background, Masli and his co-writers followed the approach of extant studies that use demographic information (e.g., general education levels) about the workforce surrounding a firm’s headquarters to overcome this issue. Specifically, they culled labor statistics for the headquarters’ Metropolitan Statistical Area (MSA) to measure the quality of area IT-capable individuals in terms of IT degree, education level and income level.

This project evolved from a previous study Masli co-wrote where he found that companies with greater access to employees possessing strong IT skills tend to have fewer financial misstatements and internal control weaknesses. That research focused on the role of IT capability in ensuring the accuracy and reliability of such information.

“In this new paper, we wanted to explore the other key pillar of high-quality financial reporting: relevance,” he said. “We examine how employees’ IT skills contribute to producing less complex and timely financial disclosures. So this study is a natural extension of our prior work and part of a broader effort to understand how human capital — particularly IT-capable talent — shapes the quality of financial information that companies provide to the public.”

They also demonstrate how such employees help reduce complexity in XBRL filings, supporting more timely earnings disclosures. This suggests that investing in IT-skilled human capital doesn’t require a trade-off between reliability and relevance.

“It can enhance both dimensions of reporting quality, which is a powerful insight for companies and policymakers alike,” he said.

Masli joined KU in 2011, where he continues his research in three key areas: the impact of IT in financial reporting quality and business performance; assurance and auditing of companies; and the labor market for executive teams. (He is also stepping into the role of Associate Dean of Graduate Programs.) His past work concerning includes “Prioritizing IT Management Issues and Business Performance” and “Complementarity Between Investment in Information Technology (IT) and IT Human Resources: Implications for Different Types of Firm Innovation.”

If Masli were the CEO of a firm, how would he incorporate these latest findings into his business strategies? 

“I would ensure my company has a robust talent strategy focused on attracting, developing and retaining high-quality IT-capable employees,” he said. “This means investing in high-performance work systems — such as ongoing training, cross-functional team structures, flexible tech-forward work environments and clear career development paths — that make the company attractive to top IT talent.”

Masli believes the ability to integrate IT expertise into the financial reporting process isn’t just a technical advantage.

He said, “It’s a competitive edge that helps firms communicate better with the market, respond faster to risks and strengthen their overall governance.”