The effect of restatements on office-level audit quality
ISSN: 0268-6902
Article publication date: 10 June 2024
Issue publication date: 9 July 2024
Abstract
Purpose
This study aims to provide evidence on how the issuance of a nonreliance restatement affects non-restating clients of the same audit office.
Design/methodology/approach
To test the effect of restatement issuance on office-level quality, this study runs regressions using both input- and output-based measures of audit quality.
Findings
This study finds that in the years where one or more clients of an audit office issue a restatement, audit effort is lower for non-restating clients of the same office. When two or more clients issue a restatement, other clients are charged lower audit fees, file later and are more likely to experience an audit failure.
Originality/value
This study contributes to the literature on office-level audit quality and provides an explanation for the longitudinal correlation of office-level audit failures.
Keywords
Acknowledgements
Data availability: Data are available from the public sources listed in the text.
Citation
Nash, J. and Bailey, C. (2024), "The effect of restatements on office-level audit quality", Managerial Auditing Journal, Vol. 39 No. 5, pp. 500-521. https://doi.org/10.1108/MAJ-09-2022-3709
Publisher
:Emerald Publishing Limited
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