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Open Access
Article
Publication date: 11 June 2020

Shayan Farhangdoust and Lida Sayadi

The present study seeks to shed further light on the effectiveness of Basu (1997) and Khan and Watts' (2009) differential timeliness metrics in detecting predictable differences…

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Abstract

Purpose

The present study seeks to shed further light on the effectiveness of Basu (1997) and Khan and Watts' (2009) differential timeliness metrics in detecting predictable differences in conservatism following corrections of restated earnings.

Design/methodology/approach

Using cross-sectional and time-series analyses for companies listed on the Tehran Stock Exchange during 2009–2013, the results indicate lower conservatism for restating firms as compared to their counterparts during prerestatement period.

Findings

Using cross-sectional and time-series analyses for companies listed on the Tehran Stock Exchange during 2009–2013, the results indicate lower conservatism for restating firms as compared to their counterparts during prerestatement period. In contrast, our findings are indicative of higher conservatism among these restating firms during the years of restatements. Moreover, the time-series approach captures a higher conservatism for the restating firms during restatement years than prerestatement periods. Overall, these results provide insight into the usefulness of the metrics used in the restatement setting.

Originality/value

Similar to recent papers, the present study seeks to shed further light on the ability of Basu-based coupled with Khan–Watts-based measures of conservatism to detect situations in which companies' earnings are known to be significantly restated.

Details

Asian Journal of Accounting Research, vol. 5 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 4 December 2017

Azam Eshagniya and Mahdi Salehi

This paper aims to examine the effect of financial restatement on changing the auditor in the following years.

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Abstract

Purpose

This paper aims to examine the effect of financial restatement on changing the auditor in the following years.

Design/methodology/approach

The study uses data of 105 companies (735 company-years) listed on the Tehran Stock Exchange collected during the period 2008-2014. Logistic regression is used to test the hypotheses.

Findings

The results of hypotheses present that restatement does not cause auditor changes and that as the severity of a restatement increases, the auditor change in the following year of restatement also does not increase. Restating companies having strong governance do not go for auditor changes as compared with other companies. In addition, in companies that are restating, non-big auditor changes are not more likely than a big auditor. Also, in companies restating simultaneous with a CEO turnover, there is no possibility of auditor change. Furthermore, multinomial logistic regression showed that the adjustments resulting from the correction of errors and changes in procedures and the amount of adjustments do not cause auditor change in the following year. So, the results have shown that the restatement is not an important factor in changing auditor the next year.

Originality/value

The current study analyses the impact of financial restatement on auditor changes in a deep manner in a developing country like Iran.

Details

Asia Pacific Journal of Innovation and Entrepreneurship, vol. 11 no. 3
Type: Research Article
ISSN: 2071-1395

Keywords

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