Client restatement announcement, audit office human capital investment, and audit quality improvements
Daniel Aobdia,
Xuejiao Liu,
Ke Na and
Hong Wu
Journal of Accounting and Economics, 2025, vol. 79, issue 2
Abstract:
This paper examines audit offices’ human capital investment in response to client restatement announcements and the resulting effects on audit quality and audit office client base. We find that audit offices attempt to acquire human capital and talent by posting more audit-related job positions just after a client announces a restatement. The increase in job postings follows restatements with more negative announcement returns and restatements of annual financial statements, and is concentrated among more senior and experienced positions. Importantly, the increased job postings are not driven by replacement hiring due to individual auditor departures and reflect more auditors joining the office. These human capital investments reduce future client misstatements and losses in client portfolios, indicating improvements in actual and perceived audit quality. Audit offices are also more likely to replace audit managing partners and prevent the signing partners of the misstated financial statements from signing new audit reports after restatement announcements.
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165410124000715
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:79:y:2025:i:2:s0165410124000715
DOI: 10.1016/j.jacceco.2024.101741
Access Statistics for this article
Journal of Accounting and Economics is currently edited by J. L. Zimmerman, S. P. Kothari, T. Z. Lys and R. L. Watts
More articles in Journal of Accounting and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().