Financial Restatement And Accounting Firm Change

In China, the financial restatement problems of the listed companies have raised great concern over the past decade. Relevant data shows that in recent years, the proportion of the listed companies'occurring financial restatements is improving. Restatements will cause damage to the company's reputation in the market, and bring serious economic and legal consequences to the listed companies, including accounting firm change. This article attempts to explore the relationship between financial restatement and accounting firm change based on the perspective of accounting firms'industry specialization. It has important theoretical and practical significance.In this paper, we use 2004 to 2014 all the listed companies'data as a sample, and use descriptive statistics and multivariate regression models to analyze the full sample, to verify whether a company's auditor change would be affected by industry specialization after the financial restatement. The accounting firms'industry specialization is measured by the share of industry mix. This article delves into exploring how the financial restatement affects a firm's auditor change when it occurs in the listed company. Firstly, we studied the effect of financial restatement on accounting firm change in general. Secondly, we divided the sample into irregularities and errors, in order to study the effect of different types of financial statements on accounting firm change. In addition, we also constructed reraito and item as proxy variables of financial restatements to explore the influence of the severity of financial restatements on accounting firm change.Through empirical research methods, we draw the following conclusions:(1) After financial restatements, the listed companies are more likely to change accounting firms, and are more likely to change to accounting firms with a high degree of industry specialization. (2) Compared with the error sample, the irregularity sample is more likely to change to accounting firm with a high degree of industry specialization. (3) The severity of financial restatement is positively related to accounting firms'industry specialization. The higher the severity of financial restatement is, the more likely that the company change to accounting firm with a high degree of industry specialization.The innovations of this article are as follows:(1) Explore the influence of financial restatements on the accounting firm change based on the respective of industry specialization (2) We divide the sample into irregularities and errors, in order to study the effect of different types of financial statements on accounting firm change. (3) We constructed reraito and item as proxy variables of financial restatements to explore the influence of the severity of financial restatements on accounting firm change.