Heterogeneity Of Financial Restatement,CEO Power And Audit Fees

With the increasing requirement of financial information which is caused by economic Integration,the perfection of financial restatement system is becoming more and more important.In recent years,in China,financial restatements occur frequently with wide range,the number of financial restatement company increased year by year.However,there is still insufficient institutional constraints towards financial restatement.Although as a policy instrument,the target of financial restatement is to improve the quality of information,based on many phenomena,the financial restatement began to become the instrument of management for selfinterest operation.The use of financial restatement with different purposes and ways result in risks and characteristics in various degree.It means that scholars cannot generalize them in their research.That is the financial restatement heterogeneity which will be the key points of this paper.Based on the previous research,this paper uses the principle-agent theory and the risk-premium theory to analyze the impact of financial restatement heterogeneity towards auditing fee.At the same time,this paper uses management Power theory to clarify the influencing mechanism which is applied in how management use the restatement with CEO Power for self-interest,and also clarify the method of how the CEO Power impact the relationship between financial restatement heterogeneity and auditing fee.Based on the existing of financial restatement heterogeneity,various kinds of financial restatement mean varying degrees of risk.In the empirical research,I distinguish the financial restatement samples according to the content of them,for example,according to whether the restatement refer to income,cost and profit,etc.Based on the classification,I divided the restatements into Core financial restatement and non-Core financial restatement,and then learn the relationship among financial restatement heterogeneity,CEO Power and auditing fee.This paper collected the date of financial restatement samples from Chinese Ashare mainboard listed companies from 2011 to 2016,and match the corresponding non-restated sample with them,and finally get the master samples.By learning the relation among financial restatement heterogeneity,CEO Power and auditing fee,I finally got the following results: First,with the restriction of other unchanged condition,both Core financial restatement and non-Core financial restatement are positively correlated with auditing fees.Certified public accountant could recognize the auditing risk signal contained in Core financial restatement and non-Core financial restatement,and then raise the auditing fee accordingly;Second,with the restriction of other unchanged condition,under the influence of financial restatement heterogeneity,compared with the companies with non-Core financial restatement,the companies with Core financial restatement holds more prominent relationship with auditing fee.In other words,the Core financial restatement refers to cost and income,and other modification,it may be speculated to mixed with subjective human motivation,there will be bigger risks and will significantly raise the level of auditing fees;Third,with the restriction of other unchanged condition,under the influence of financial restatement heterogeneity,CEO Power could significantly promote the positive correlation between Core financial restatement and auditing fee.It means that the concentration of CEO Power will provide the liberal environment for the management to use financial restatement for self-interest.So that the financial restatements with human subjective motives carry greater risks.Compared the companies with Core financial restatement,the concentration of CEO Power could significantly impact the CPA's sensitivity to Core financial restatements,and there will be more auditing resource devoted to auditing process,and finally stimulate the increase of audit fees.It means that the concentration of CEO Power could more easily stimulate the sensitivity of CPAs towards the risks inside Core financial restatement.In addition,auditors are driven by professional caution,so they will focus on the non-Core financial restatement happened in the companies with more bigger CEO Power,concern the possibility of the non-Core financial restatement because the management ignore the Internal control design and execution.Compared with previous research,the innovation points of this paper are as follows: first,the introduction of the heterogeneity of financial restatement,broadened the research perspective of financial restatement.This paper focus on the heterogeneity of financial restatement and divided it into Core financial restatement and non-Core financial restatement based on various risk property.The research results include more targeted meaning and reference significance;Second,it is the first time to regard CEO Power as manipulated variable to learn its impact on the heterogeneity of financial restatement and auditing fee relationship.In addition,because of the impact of the heterogeneity of financial restatement,there are various risk behind different kinds of financial restatement.There are also diverse moderating effects caused by CEO Power.It is impossible to generalize them.In the end,based on the conclusions of the research,this paper provides related advices from the perspectives of Listed company,Accounting firm and National regulatory authority.(1)Enterprises optimize the allocation of management Power to form effective checks and balances and supervision of CEO Power;(2)Firms pay attention to risk-oriented audit of financial restatement,forming external checks and balances of CEO Power;(3)State regulatory authorities improve the financial restatement system and improve the quality of information disclosure.