Does the Mafia Hire Good Accountants?

• In Event: 5.02. Audit Quality Indicators

Abstract

We investigate if organized crime groups (OCG) are able to hire skillful accountants. We use a
sample of Italian private companies whose financial statements are jointly audited by three
accountants and use unique data about criminal records to identify accountants with connections
to OCG. We find that the non-OCG clients serviced by accountants with connections to OCG have
higher quality financial statements. We also find that these non-OCG clients receive more
modified audit opinions suggesting greater auditor independence. These findings provide indirect
evidence the Mafia is able to hire good accountants, despite the downside risk of Mafia
associations. Results are robust to controls for self-selection, for other determinants of auditor
expertise, direct connections of directors and shareholders to OCG, and corporate governance
mechanisms that might influence auditor choice and audit quality.

Authors

• Pietro Andrea Bianchi, Florida International University

• Jere R Francis, University of Missouri-Columbia

• Antonio Marra, Bocconi University