Analysis Of Relevance Between Accounting Firms And Financial Restatement In China A-share Market

The earliest financial restatement problems research started in the United States. Since the1990s, the U.S. company’s financial restatement is becoming increasingly apparent. It is not only reflected in the number of the company’s financial restatement surge occurs, but also in the average asset size of the company is also an increasing financial restatements. The financial restatement is clearly a negative signal for the release of the securities market, financial restatements will not only affect the underlying stock price, the more serious problem is that this event will lead investors to doubt the financial integrity of the universal, so shake all investors confidence, resulting in a very bad impact on the securities markets. In the growing problem of foreign financial restatements, while the. company’s financial restatement of the problem also began to increase. There were15.79%of the listed company’s financial restatement behavior in2006, this data is three times more than2003. By finishing with a financial restatement issues relevant literature, we find that most of the existing studies have focused on the inter-relationship between corporate governance and financial restatement research. Research on the relationship between external audit and financial restatements also from the audit opinion, audit quality, audit fees, non-audit services, such as the direction of the external audit proven to reduce the occurrence of financial restatements.However, in the above study between external audit and financial restatement relations, we find that missing an important part of that accounting firm’s own characteristics on the impact of financial restatements. Studies have shown that CPA characteristics may affect audit quality, the CPA should feature may also have some impact on the behavior of the company’s financial restatement. Based on this, trying to angle from the accounting firm to study the characteristics of the financial restatement issues, hoping to explore the relationship between the two, research in this area to make its own contribution, and trying to build a development perspective of Certified Public Accountants reduce and prevent financial restatement issues put forward effective proposals.In this paper, we plan to study the effects of two aspects of the accounting firm characteristics on financial restatements, the two aspects are accounting firm’s reputation and accounting firm’s industry’s reputation. We presents two assumptions. Assumption one is when the other conditions are same, compared to other companies, the choice of the top ten accounting firms lower probability of occurrence of the company’s financial restatement; assuming two under the same conditions as the other cases, the higher the company’s accounting firm selected industry-specific degree of financial restatements of its occurrence may be lower. To verify the above two assumptions, we use2003to2012A-share listed company’s data as a sample, ranked by CPA accounting firm’s reputation as an alternative indicator, the share of industry mix by law to measure the CPA industry specialization the extent of the use of Spearman correlation coefficient test, a preliminary analysis of the accounting firm’s reputation and CPA industry specialization and financial restatements correlation between the final multiple regression analysis, delve into the listed company when the accounting firm was selected the top ten when CPA or accounting firm showed a higher degree of specialization, the company’s financial restatement chance of unaffected. To ensure the reliability of the results of the above empirical analysis, the paper carried a robustness test, the specific method is to expand the range of explanatory variables, or change its definition of the way, the reputation of the accounting firm, accounting firms and financial industry specialization degree of re-correlation between the conduct described robustness test, then the results were compared with the above, in order to test the reliability of conclusions.Through empirical research methods concludes:CPA feature in the industry reputation and the higher degree of specialization, the lower the chance of being audited entity’s financial restatements. And explanation at the end of this article for defects and improve the direction, and proposed several recommendations based on the conclusions of this paper, as in the process of promoting CPA construction, not because of the blind pursuit of business expansion and ignore the firm the reputation of the firm’s requirements; accounting firms in the growth process, because attention to the cultivation of a professional level of employees in the industry to improve their industry specialization degree.