Financial Restatements: Trends, Reasons for Occurrence, and Consequences - A Survey of the Literature
59 Pages Posted: 25 Aug 2018
Date Written: August 13, 2018
This state-of-the-art paper summarizes findings on restatement papers mainly covering years 2001 to 2017. Our review provides a comprehensive picture on financial restatement research mainly for U.S., its trends, reasons for occurrence, and consequences for affected parties (e.g., investors, auditors). Furthermore, we outline reputation-rebuilding measures undertaken after a restatement and their effect on the information content of earnings. Moreover, the scope, versatility, and universality of restatements as a single proxy for financial reporting and audit quality are presented. We carefully illustrate nuances in restatement types. Overall, this paper aims at helping institutional standard setters understanding the meaning of an increase in restatements and giving shareholders an insight on the severity of various corrections. Finally, researchers learn about chances and limitations when financial restatements are applied as an alternate proxy for low financial reporting and low audit quality.
Keywords: survey, financial restatement, firm value, cost of equity, auditing
JEL Classification: G1, K4, M4
Suggested Citation: Suggested Citation