Study On The Relationship Between Financial Restatement And Audit Opinion

Financial restatement of listed company means it could exist earnings manage- ment and is also related to problems like audit quality. Due to domestic research in this area starting late, the research on relationship between financial restatement and audit opinion is far from adequate. Whether financial restatement means low audit quality even audit failure is a question worth exploring.This article is based on listed company that occurs financial restatement, and collects data of these companies from 2006 to 2008 in A stock market in China as samples, then does empirical research on the relationship between financial restatement and audit opinion. It refers the Logistic model; nominates the opinion style as dependent variable, and restatement ratio, scope, direction, core or not as explanation variables. Then it does research on whether accounting error draws attention from CPA in the year the error occurs and whether it still influences the judge of CPA in restatement year. Based on the above, it adds audit materiality, and explores whether CPA pays more attention to the error when it surpasses materiality, and whether the listed company with error surpassing materiality could be given stricter opinion by auditor from big accounting firm. The conclusion is that in the year when accounting errors occurs, CPA pays attention to extent and range of accounting error professionally and still is influenced by them in the accounting error correction year. But whether the restatement is of central subject and the direction of restatement don't show obvious connection with the audit opinion in the year when accounting error occurs and when corrected. After taking materiality into consideration, it shows that CPA keeps caution on the accounting error surpassing materiality level which is one percent of asset or earning, but auditor from big accounting firm doesn't give stricter audit opinion to this kind of behavior. At last, it concludes some meaningful advice for regulate department and accounting firm.The main contribution of this research is that it not only does research on the relationship between accounting error and audit opinion in the year when accounting error occurs, and also explores the relationship in the year when error is corrected. And based on these, it takes audit materiality into consideration, analyzes that whether accounting errors surpassing materiality could be paid more attention by CPA, and whether the audit opinion is stricter when it is audited by CPA from big accounting firm. Moreover, it also is the review on the changed market since that part of the samples is from the new market after the adoption of new accounting policy. Wish this research could be beneficial both to our capital market development and the progress of audit career.