Auditors' Financial Restatements And IPO Audit Quality

Financial restatement refers to the company's restatement of their financial reports.The occurrence of the financial restatement to a certain extent can be seen as auditors do not perform their due duties.They may not fully perform the required audit procedures,or may also be the lack of personal ability,leading to its failure to accurately and timely disclosure of errors in the financial statements.As an individual,the auditor has various personal characteristics such as education background,gender,industry experience and risk preference.Therefore,from the perspective of the financial quality of the report,the auditor's personal characteristics will inevitably have an important impact on the audit process.This shows that the individual auditors have played an outstanding role in the audit process.Furthermore,considering the impact of auditing systemic issues on the audit results,because of the predictability of auditors and the role of identity in decisionmaking behaviors,we believe that auditors exist problems such as lack of experience,lack of ability to find corporate financial problems when the company undergoes financial restatement.And ultimately this issue may be contagious to other companies that it audits to some extent.In recent years,a series of studies have combined financial restatements with the auditor's personal characteristics,examined the impact of auditor's professional competence and independence on financial restatements,but rarely studied the relevance of financial restatements and IPO audit quality.Given the importance attached to auditing by IPOs in the market environment,auditors will gain experience from the financial restatements to improve the quality of later high-risk IPO audits,or because of the individual characteristics and the systemic problems of auditors,the contagion effect of financial restatements to the quality of subsequent IPO audits will ultimately leads to lowquality IPO audits.This paper presents the demonstration results by examining the correlation between the auditor's personal financial restatement experiences and the audit quality of the IPO project involved later.This paper begins with the introduction of research background and significance,and puts forward the research purposes and research methods of this article.After combining the theoretical basis of the thesis and literature reviews at home and abroad,I propose hypotheses,establish relevant models,and conduct empirical analysis.Finally,based on summarizing the research conclusions,I list the deficiencies of this paper and the future research direction of this type of study.Finally,it is demonstrated that the auditor's personal financial restatement experience will affect the audit quality of the IPO project he participated in later,and it has a significant negative correlation.Further research also found that this contagiousness will be weakened by the features of the “big four” accounting firm,State-controlled companies,independent directors account for a higher proportion of the board of directors and IPO securities underwriters have a higher ranking.Therefore,for an auditor who plans and executes the entire auditing process that ultimately determines the type of company audit report,there is indeed a financial restatement of the contagion effect,which in turn affects the subsequent audit of the IPO project.The auditors did not gain experience and lessons form the previous financial restatement experiences to improve the quality of subsequent IPO audits.