Are out-of-period adjustments a type of stealth restatement? An examination of nonaudit services and out-of-period adjustments

What is it about?

A recent trend in financial reporting is the use of out-of-period adjustments instead of restatements. This could indicate that OOPAs are a type of stealth restatement for opportunistic purposes. Our results indicate that auditors who provide non-audit services (NAS) have a negative and highly statistically significant association with the existence of OOPAs. These findings indicate that NAS does not impair auditor independence, but rather contribute to knowledge spillover, which leads to higher financial reporting and audit quality.

Featured Image