The Impact Of Audit Characteristics On Financial Restatements

Since the reform and opening up,the capital market develops very quickly.The capital market has been able to function healthily heavily rely on high-quality financial information.True,relevant and reliable financial report is very important.But in recent years,whether developed or developing country,the number of financial restatements and severity are increasing.According to the data collected,the proportion of nearly three years' financial restatements have raise to as high as 19.51%,which means one fifth of the listed companies have released supplementary correction notice.The reason why financial restatements occur is because of incomplete and inaccurate financial information the companies have ever reported.It causes the information can't be the basement of investment and other decisions,and it would seriously harm the emotional of capital holders,causing the whole market entrusted and panic.Because external users of information lack the professional and identify ability,the report can be made public only after the CPA audit it.The occurrence of financial restatements described auditor did not find these errors and didn't carry the appropriate responsibility.It is a serious dereliction of duty.Therefore,from the viewpoint of the auditor,reducing and avoiding the occurrence of financial restatement is a very important breakthrough and starting point.The paper selects a few quantified and representative indicators-audit scale,tenure,fees,rotation and opinions as explanatory variables,using normative and empirical analysis to get the following conclusions: The relation between audit rotations,non-standard audit opinions with financial restatements is a significant positive correlation;The relation between audit fees with financial restatement is a significant negative correlation;The negative correlation between audit size with financial restatements is not significant;The relationship between audit tenure with financial restatements is U-shaped.According to research results,the paper proposes the following recommendations and measures: first,making and implementing financial information disclosure system and external supervision penalties system.Second,optimizing audit services from the external market.On the one hand,it must strengthen the training to improve the skills and professionalism of the practice;on the other hand,it also should focus on maintaining auditor independence so as to improve audit quality.Third,improving the internal governance structure of the company.The most fundamental is not only to improve the quality of financial staff,but also to establish good internal checks and balances system,to play independent directors and the supervisory board's supervision and management advantages.At the same time,it should ensure the appropriate internal controls in order to provide high-quality financial information to the market.