|
An Analysis of the Relationship Between Accounting Restatements and Quantitative Benchmarks of Audit Planning Materiality
Hanmei Chen, Arizona State University
Kurt Pany, Arizona State University
Jian Zhang, San Jose State University
ABSTRACT. What is the relationship between the amounts obtained using professionally accepted quantitative benchmarks of audit planning materiality and the size of accounting misstatements corrected by financial statements restatements? The question is important because if audit planning levels for materiality are in excess of the amounts subsequently restated due to accounting misstatements, this might serve as an explanation for a number of recent restatements. Furthermore, it might suggest the need to reconsider materiality planning levels, thus resulting in a recalibration of the audit process. We use a sample of 143 companies and compare the amounts of the restatements with planning materiality benchmarks established to aid auditors in arriving at audit planning levels. We find that, although there are a number of ways of analyzing the data, depending on materiality benchmark followed, as high as 64 percent of the restatements involve income levels less than the planning materiality level.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|