Executive Turnover,Financial Restatement Heterogeneity And Audit Fees

The world’s establishment of free trade areas, opens a new chapter for the development of global trading. With the advancement of regional economic integration, the financial information of the market as the main trading platform and the media, is becoming increasingly important and irreplaceable. Various stakeholders make decisions based on the given information, for the high quality of financial information is self-evident naturally. In recent years, however, a trend of financial restatement is gradually spreading in our country, which makes the credibility and transparency of financial information suffered unprecedented challenges and seriously hindered the normal operation of the capital market.The paper is based on the all listed companies in the securities market from Shanghai and Shenzhen from2010 to 2012,based on keywords searching out financial restatement companies, and according to certain standards select financial restatement paired samples, using a variety of empirical analysis methods to explore the relationship between the executive turnover, financial restatement heterogeneity and audit fees. We found that:the professional external auditors can identify audit risk about financial restatement, financial restatement can lead to the company’s audit fee increase; the impact on audit fees vary from different types of financial restatement, core restatement company will raise the level of audit risk, and auditor will charge higher audit fees. In response to the crisis of confidence, restatement firms choose to change management to regain lost reputation capital. For non-core restatement companies, management changes contribute to the improvement of the potential risk for the auditor, and thus the audit fees will decrease. Core restatement companies, which purpose is earnings management, have serious audit risk, just by changing management cannot have significant effect on decreasing audit fees.Compared with the previous research, contribution of this paper is mainly in the following several aspects:(1)from the perspective of the independent external audit market, investigates whether the change in management can weaken the adverse influence of financial restatement in audit market. The research expand corporate governance issues to the audit market.(2)on the basis of distinguishing between core and non-core restatement, the paper deeply analysis the relationships among financial restatement, audit fees and management turnover.(3)the paper can trigger the company of financial restatement thinking more about the mechanism of corporate governance and how to further optimize the corporate governance structure, which have an important significance.