Financial Restatements,Auditor Reputation And Auditor Switches

Quality of accounting information has affected the interests of all parties,and the listed company's financial restatements has seriously affected the quality of accounting information and the investor's decisions have been influenced.Recently,China's financial restatement phenomenon is becoming more widespread,increasing,which led scholars do a large amount of research work about financial restatements.Summary of previous studies on the issue of financial restatements,we found that this issue is mainly focused on the financial restatement's motivation and economic consequences,and in the study of the relationship between financial restatements and auditor switches,also stay in the overall relationship.Through theoretical and empirical analysis,This paper will further distinguish the different types of financial restatement's impact on auditor switches and the auditor reputation's impact on the financial restatement company which switch their main auditor to study the relationship between the three.This paper begins with research from the theoretical aspect.First,the relevant literature was been reviewed,then defind the concept and analyze the theoretical.Found that when a listed company occurred financial restatements,the auditor will be able to identify the risks when the risks can not avoid,auditors might imply the financial risk management of resignation strategies;With respect to the financial restatement companies,they may make dismissal decisions for the sake of their own interests or the auditor's risk strategy.Through the two angles,we illustrate the relationship among the financial restatements,the auditor reputation and the auditor switches.That becomes the empirical Analysis' s solid foundation.In the empirical analysis,first it select all A-share listed companies as samples from2011 to 2014 in Shanghai and Shenzhen stock market,then preliminarily compare and analyze China's financial restatements and auditors switches in recent year.Then holistically research the financial restatements' impact on auditor switches.Secondly select financial restatement samples from all samples,select the relevant restatement variables,research correlation between auditor switch and core and non-core financial restatements,the impact on net profit and the different types of financial reports.Finally further analyze the impact on the reputation of the auditorbetween that two relationships.Based on the results of theoretical and empirical analysis,we draws conclusions and put forward countermeasures and suggestions,noting the limitations of this study.According to the conclusions of this study we found that the listed companies who occurred financial restatements are more likely to switch auditors;cores financial restatements,to a large extent impact on net profit,restate the annual report of the company is more inclined to switch the auditor;the auditor reputation can suppressing the occurrence of financial restatements company switch the auditor.This study enriches the related research about the corporate governance mechanism of external audit,financial restatements and auditor reputation,help auditors to improve their risk sensitivity on the trial practice in the future,and take effective risk management strategy to promote the firm brand promotion and focus on reputation building.It will help investors to understand the economic consequences of financial restatements and understand the behavior of auditor switch;In addition,it can promote the relevant laws and regulations to become sound and complete.And it have practical significance to improve auditor market regulatory system and it is conducive to the healthy and stable operation of the audit market.