Firm Accrual Quality Surrounding Restatements
56 Pages Posted: 12 Dec 2009 Last revised: 11 Jan 2011
Date Written: December 9, 2010
Abstract
We examine direct measures of accrual quality for a sample of restatement firms and find that accrual quality improves significantly, on average, from the period of misstatement to the post-restatement period. Using the Institute of Internal Auditors corporate governance model to frame our multivariate analysis, we find that both post-restatement levels and changes of accrual quality are significantly higher for firms with management change and significantly lower for firms switching to a lower quality auditor. Overall, our findings underscore the importance of governance mechanisms in determining accrual quality in the years following a restatement.
Keywords: restatements, accrual quality, management turnover, auditor quality, corporate governance
JEL Classification: M41, M43, G3
Suggested Citation: Suggested Citation
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