Work

Interim restatements and the audit engagement

Year: 2025

Type: article

Abstract: We examine the audit implications of 10-Q misstatements and explore how the timing of the detection and correction of these misstatements affects an audit. We find that auditors respond to interim restatements by charging higher fees, taking more time to complete an audit, and issuing more ICMWs. Despite these changes, interim restatements are negatively associated with year-end financial reporting quality. We further distinguish between early and late interim restatements and find some supporting evidence that late interim restatements have greater impacts on audit engagements, consistent with the notion that late detection of misstatements allows less flexibility for the client and auditor to adjust to heightened engagement risk. Overall, we provide evidence on how interim restatements in general, and the timing of such restatements in particular, have different implications for audit engagements.

Source: Journal of Accounting and Public Policy

DOI: 10.1016/j.jaccpubpol.2025.107350

Authors: Nicholas J. Cicone, W. Robert Knechel, Hyun Jong Park

Institutions: Mississippi State University, University of Auckland, University of Florida, Temple University

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,380

Funders: Mississippi State University, University of Florida, Temple University