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The effect of restatements on office-level audit quality

Author

Listed:
  • Jonathan Nash
  • Cristina Bailey
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.

Suggested Citation

  • Jonathan Nash & Cristina Bailey, 2024. "The effect of restatements on office-level audit quality," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 39(5), pages 500-521, June.
    • Handle: RePEc:eme:majpps:maj-09-2022-3709
    DOI: 10.1108/MAJ-09-2022-3709
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    More about this item

    Keywords

    Office-level audit quality; Restatements; Audit fees; M41; M42;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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