Financial Restatement And Independent Audit Quality

From generation, development to becoming mature gradually, Chinese capital market develops more than10years. As the main part of supervision and management system of capital market, the independent audit gets more and more attention from the users of accounting statements, such as the shareholders and investors. At the same time, it becomes one of the topics in the accounting academics. After the happening of the malignant audit failure cases such as Qiong Ming Yuan and Yin Guang Xia, our CPA is facing serious credibility crisis. It not only is contrary to the basic principles (such as true, fair, full disclosure and transparency) which support to the success of the market, but also endangers the survival and development of the CPA profession.Financial restatement is the specific system of the listed companies, it refers to the behavior that listed companies restate their previously published financial reports when they discover and correct errors of prior periods. The independent audit quality refers to the accuracy that the CPA’s audit papers certificate for whether there are material omissions or misleading in the financial reports. Wallman has said that it is more cogency to assess the independent audit quality of listed companies by the specific events occurred in the listed companies. Financial restatement is such a kind of event. The happening of this event consequentially marks that there are mistakes which mislead inventors in the previous financial reports of the listed companies. This paper evaluates the independent audit quality by financial restatement, it focuses on the CPA’s ability of indentifying the errors of prior periods, whether the CPA issued appropriate audit opinion around the financial restatement.This paper can be divided into three parts:the theory part, the empirical part, the conclusion and countermeasure part. The main contents of the theory part include the three major theoretical of the audit quality, the game analysis about the supply and demand of audit quality, and the summarizing of financial restatement. This part is the theoretical investigation, it establishes a base for the later empirical analysis. The theory part of the main contents include the needs of audit quality and audit the quality of the three major theoretical content, audit quality of supply and demand game, the system overview of financial restatements. At first, the empirical part analyses the actuality of financial restatement in our country, it can let us realize the condition of financial restatement in recent years, at the same time we can ascertain the stylebook of the companies where the financial restatement occurs. Then, we do empirical analyzing between financial restatement and the independent audit quality. We put emphases in reviewing the audit opinion under the financial restatement. This paper not only does contrast between the financial restatement listed companies and the other listed companies, but also does contrast by different financial restatement extent and different financial restatement items. This part provides theory support for advice and countermeasure of later chapter.The conclusion of this paper shows that our CPA is conscious of the errors in their previously published financial reports. They also pay more attention to the financial reports which have more errors. At the same time, they will give stricter audit opinion according to the essentiality level. After series of audit fraud, the monitor and administer of interrelated branch is more effective. The whole environment of the audit market is ameliorated. The CPA shows independence in a certain extent on the problem of financial restatement, the independent audit quality is good.