Client restatement announcement, audit office human capital investment, and audit quality improvements

• 成果类型: Article
• 署名作者: Aobdia, Daniel; Liu, Xuejiao; Na, Ke; Wu, Hong
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University of International Business & Economics; Fudan University; Shanghai Institute of International Finance & Economics
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101741
• 发表日期: 2025
• 关键词: industry expertise; pcaob; partner; FIRMS; CONSEQUENCES; determinants; LITIGATION; experience; MANAGER; IMPACT

摘要

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.