The effect of restatements on office-level audit quality

Jonathan Nash and Cristina Bailey

Managerial Auditing Journal, 2024, vol. 39, issue 5, 500-521

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.

Keywords: Office-level audit quality; Restatements; Audit fees; M41; M42 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-09-2022-3709

DOI: 10.1108/MAJ-09-2022-3709

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