Firm Accrual Quality Surrounding Restatements

56 Pages Posted: 12 Dec 2009 Last revised: 11 Jan 2011

See all articles by Christine I. Wiedman

Christine I. Wiedman

University of Waterloo

Kevin B. Hendricks

Wilfrid Laurier University - School of Business & Economics

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

Wiedman, Christine I. and Hendricks, Kevin B., Firm Accrual Quality Surrounding Restatements (December 9, 2010). CAAA Annual Conference 2011, Available at SSRN: https://ssrn.com/abstract=1519920 or http://dx.doi.org/10.2139/ssrn.1519920

Kevin B. Hendricks

Wilfrid Laurier University - School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5
CANADA
519 884 0710 x3970 (Phone)
519 884 0201 (Fax)

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