Influence Of Auditor Characteristics On Financial Restatements

Recent years, in China’s capital market, the listed companies frequently issuedsupplement and corrected announcement of financial restatements. The behavioralcharacteristics of the auditors have a profound impact on the occurrence of financialrestatements. Therefore, research on the financial restatements from the perspectiveof auditor characteristics may help capital market regulators to supervis e the marketand provide information for investors.Data collection from2006-2011China A-share market financial restatementswill be divided into core financial restatements and non-core financial restatements.Among core financial restatements, the cost restatements, the income restatements,the provision for impairment and amortization restatements have significant earningsmanagement trends. Taking into account the characteristics of the auditor found thatthe core financial restatements of clients audited by the international "big four"accountants firm did not significantly reduced; audit tenure and the core financialrestatements has a U-shaped relationship; audit rotation of the core financialrestatement is not only have not reduced but increased. Further study also found thatnon-standard audit opinions issued by auditors significantly increased the corefinancial restatements; auditors industry expertise can reduce the number of corefinancial restatements. Divided the listed companies into state-owned property andnon-state-owned property found the main conclusions remain unchanged, indicatingthat the conclusions of this paper have certain robustness.According to the conclusions of the study, several measures should be taken toregulate financial restatements: firstly, the market regulators should improve thefinancial restatements disclosure system, enhance financial restatements regulatorypriorities; secondly, auditors can improve their own independence to foster industryexpertise to improve the practice skills; thirdly, listed companies can improve thequality of the financial staffs, improve the corporate governance mechanism andstrengthen the internal control systems to reduce the incidence of financialrestatements, thereby protecting the interests of shareholders.