The impact of external auditors on firms’ financial restatements. A review of archival studies and implications for future research
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: Management Review Quarterly, Jahrgang 73, Nr. 3, 09.2023, S. 959-985.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - The impact of external auditors on firms’ financial restatements.
T2 - A review of archival studies and implications for future research
AU - Velte, Patrick
N1 - Leuphana Universität Lüneburg Publisher Copyright: © 2022, The Author(s).
PY - 2023/9
Y1 - 2023/9
N2 - A systematic literature review includes 69 archival studies on the impact of external auditors on firms’ financial restatements, based on principal agent theory. In more detail, we separate between auditor incentives and auditor competencies to supply a high audit quality. Financial restatements represent one of the most important proxies of audit quality in archival audit research, stressing an increased relevance in empirical research, business practice and regulatory initiatives. The review highlights that many studies on auditor incentives and competencies show inconclusive results on firms’ financial restatements (e.g., fee and rotation studies). But there are indications that especially auditor expertise and audit firm size significantly decrease financial restatements. In discussing potential future research, we emphasize the need for a more detailed analysis of restatements proxies, controls for audit risk, inclusion of (corporate) governance mechanisms as possible moderators or mediators, and sustainability issues of the audit team.
AB - A systematic literature review includes 69 archival studies on the impact of external auditors on firms’ financial restatements, based on principal agent theory. In more detail, we separate between auditor incentives and auditor competencies to supply a high audit quality. Financial restatements represent one of the most important proxies of audit quality in archival audit research, stressing an increased relevance in empirical research, business practice and regulatory initiatives. The review highlights that many studies on auditor incentives and competencies show inconclusive results on firms’ financial restatements (e.g., fee and rotation studies). But there are indications that especially auditor expertise and audit firm size significantly decrease financial restatements. In discussing potential future research, we emphasize the need for a more detailed analysis of restatements proxies, controls for audit risk, inclusion of (corporate) governance mechanisms as possible moderators or mediators, and sustainability issues of the audit team.
KW - Management studies
KW - financial restatements
KW - external auditor
KW - corporate governance
KW - restatements
KW - enforcement
UR - http://www.scopus.com/inward/record.url?scp=85127705795&partnerID=8YFLogxK
UR - https://www.mendeley.com/catalogue/897f0f51-2d14-38dc-a7d6-76f56bb1c0c6/
U2 - 10.1007/s11301-022-00264-x
DO - 10.1007/s11301-022-00264-x
M3 - Journal articles
VL - 73
SP - 959
EP - 985
JO - Management Review Quarterly
JF - Management Review Quarterly
SN - 2198-1620
IS - 3
ER -