Trends Of Accounting Restatements During The Period 2000-2007 And Big Four/Five Auditors

Abstract

The objective of this study is to provide further analysis on the trends of accounting restatements during the period 2000-07 and the role of Big four/five auditors. Given the changes in regulatory environment after the enforcement of Section 404 of the Sarbanes-Oxley Act, we find that there is a significant increase in restatements in recent years. We also find that restatements being disclosed in recent years are more serious, however, they are disclosed on a more timely basis. Consistent with the general belief that Big four/five auditors are better quality auditors, we find that they are associated with shorter restatement disclosure lags. In addition, restatements with positive financial statement effects are more likely to be disclosed sooner than those with negative effects.