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Reporting accountant appointments and accounting restatements: evidence from UK private companies

Clatworthy, Mark A. and Peel, Michael J. 2021. Reporting accountant appointments and accounting restatements: evidence from UK private companies. British Accounting Review 53 (3) , 100974. 10.1016/
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In recent years, regulators have exempted an increasing number of companies from the requirement to appoint auditors, yet little is known about the role of the accounting profession in preparing and validating the financial statements of unaudited companies. In this paper, we examine empirically the factors associated with the appointment of reporting accountants. We then provide novel evidence on whether unaudited UK small private companies are less likely to restate their annual accounts when they have been prepared by an external accountancy firm (i.e., a reporting accountant). Based on a cross sectional analysis of a large sample of small private unaudited UK companies, we find that, in accordance with the ‘confirmation hypothesis’, larger companies that voluntarily disclose more financial information are more likely to appoint a reporting accountant. We also find that the accounts of companies with a reporting accountant are significantly less likely to be restated than those without. This result is more pronounced for companies disclosing more financial information and for those employing a larger accounting firm. Given the dwindling number of private companies opting for audits, our findings contribute to debates on the role of the accounting profession in enhancing private company financial reporting quality.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0890-8389
Date of First Compliant Deposit: 5 January 2021
Date of Acceptance: 25 December 2020
Last Modified: 08 Oct 2021 06:25

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