Identifying the Determinants of Financial Statement Restatements Using Artificial Intelligence
Keywords:
Financial Statement Restatement, Artificial Intelligence, Delphi TechniqueAbstract
The present study aimed to identify the determinants of financial statement restatements using artificial intelligence. Accordingly, due to the application of both qualitative and quantitative analyses, this study is categorized as mixed-method research. In the qualitative phase, the Delphi technique was employed to complete the research model and identify the indicators affecting financial statement restatements based on the opinions of twenty-one experts selected through purposive sampling. Accordingly, twenty-one indicators were identified after two rounds of the Delphi technique. Subsequently, using data from 114 companies operating in the capital market selected through a screening method, and applying the artificial neural network technique, the relative importance weight of each indicator was examined. The findings demonstrated that the twenty-one identified indicators, in order of importance and effect weight, included information asymmetry, audit committee independence, auditor industry specialization, related-party transactions, CEO overconfidence, corporate governance, institutional ownership, financial leverage, financial distress, operating cash flow, cash flow sensitivity, operational complexity, ownership concentration, board independence, board compensation, firm size, audit fees, profitability, social responsibility, industry competition, and auditor size.
References
[1] P. M. Dechow, W. Ge, C. R. Larson, and R. G. Sloan, "Predicting Material Accounting Misstatements," Contemporary Accounting Research, vol. 28, no. 1, pp. 17-82, 2011, doi: 10.1111/j.1911-3846.2010.01041.x.
[2] P. M. Dechow, W. Ge, C. R. Larson, and R. G. Sloan, "Predicting Material," 2012.
[3] A. Agrawal and T. Cooper, "Corporate Governance Consequences of Accounting Scandals: Evidence from Top Management, CFO and Auditor Turnover," Review of Accounting Studies, vol. 22, no. 1, pp. 259-299, 2017, doi: 10.1007/s11142-016-9371-3.
[4] S. Srinivasan, "Consequences of Financial Reporting Failure for Outside Directors: Evidence from Accounting Restatements and Audit Committee Members," Journal of Accounting Research, vol. 43, no. 2, 2015.
[5] M. Cross, E. Robinson, K. Salhus, and J. Zepralka, Restatement of Financial Statements: Selected Legal and Accounting Issues. Washington, DC: Wilmer Cutler Pickering LLP, 2014.
[6] G. Bolou, Y. Hassas Yeganeh, and S. Momeni, "The Effect of Financial Statement Restatement on Earnings Management and Persistence," Empirical Studies in Financial Accounting, no. 33, pp. 45-60, 2012.
[7] S. Khajavi and A. Ghadirian, "Examining the Effect of Earnings Quality on Financial Statement Restatement," Accounting Advances, vol. 7, no. 2, pp. 59-84, 2016.
[8] A. Ghadirian and N. Fattahi, "Examining the Effect of Board Characteristics on Financial Statement Restatement of Companies Listed on the Tehran Stock Exchange," Financial Accounting Research, vol. 7, no. 1, pp. 55-70, 2015.
[9] Q. Zeng, Q. Zhang, X. Du, and Y. Chang, "Do Tainted Independent Directors Affect Financial Restatement? Evidence from China," Journal of Accounting and Public Policy, vol. 56, p. 107397, 2026, doi: 10.1016/j.jaccpubpol.2025.107397.
[10] E. A. W. Wan, K. A. Kamarudin, N. H. Hassan, and A. M. Ariff, "Do Gender-Diverse Boards Improve Financial Statements Comparability? Cross-Country Evidence," International Review of Economics & Finance, vol. 108, p. 105183, 2026, doi: 10.1016/j.iref.2026.105183.
[11] A. Farshad, A. Pakmaram, and J. Bahri Sales, "Increasing Quality of Financial Statement Restatement and the Role of the Audit Committee and Information Asymmetry," Management Accounting and Auditing Knowledge, no. 51, pp. 185-199, 2024.
[12] C. M. Schrand and S. L. C. Zechman, "Executive Overconfidence and the Slippery Slope to Financial Misreporting," Journal of Accounting and Economics, vol. 53, no. 1-2, pp. 311-329, 2012, doi: 10.1016/j.jacceco.2011.09.001.
[13] T. Persley and L. Abbott, "AIA Submission: CEO Overconfidence and the Incidence of Financial Restatement," Advances in Accounting, vol. 49, no. 1, pp. 74-84, 2023.
[14] H. Zhang, H. Huang, and A. Habib, "The Effect of Tournament Incentives on Financial Restatements: Evidence from China," The International Journal of Accounting, vol. 53, no. 2, pp. 118-135, 2021.
[15] J. K. Aier, J. Comprix, M. T. Gunlock, and D. Lee, "The Financial Expertise of CFOs and Accounting Restatements," Accounting Horizons, vol. 19, no. 3, pp. 123-135, 2015.
[16] J. G. Lawson and D. A. Street, "Determinants and Market Consequences of Audit Partner Changes after Restatements," Journal of Accounting and Economics, vol. 75, no. 2, p. 101545, 2025, doi: 10.1016/j.jacceco.2023.101545.
[17] N. J. Cicone, W. R. Knechel, and H. J. Park, "Interim Restatements and the Audit Engagement," Journal of Accounting and Public Policy, vol. 53, p. 107350, 2025, doi: 10.1016/j.jaccpubpol.2025.107350.
[18] S. Hassanzadeh and N. Rasouli Kordestani, "Audit Fees and Financial Statement Restatement: The Moderating Role of Audit Quality," Empirical Accounting Research, 2025.
[19] X. Huang, H. Houang, and L. Yuan, "Do Firms Incur Financial Restatements? A Recognition Study Based on Textual Features of Key Audit Matters Reports," International Reviews of Financial Analysis, vol. 96, pp. 189-200, 2024.
[20] C. Martinez-Sola, S. Garsia, and P. Millares, "The Effect of Financial Constraints on Accounting Restatements: Spanish Evidence," European Research on Management and Business Economics, vol. 30, pp. 120-130, 2024.
[21] S. Haghighi, P. Akbari, and H. Shirbandi, "Examining the Effect of Financial Constraints on Financial Statement Restatement in Companies Listed on the Tehran Stock Exchange," in Fourteenth International Conference on Modern Research in Accounting, Management, and Humanities in the Third Millennium, Tehran, 2025. [Online]. Available: https://civilica.com/doc/2296337.
[22] T. Bermpei, A. N. Kalyvas, L. Neri, and A. Russo, "Does Economic Policy Uncertainty Matter for Financial Reporting Quality," Review of Quantitative Finance and Accounting, vol. 58, no. 4, pp. 795-845, 2023, doi: 10.1007/s11156-021-01010-2.
[23] T. Ma, D. Niu, X. Fang, X. Ji, and A. Sensoy, "Cautious and Conscientious or Fish in Troubled Waters: Knightian Uncertainty and Financial Restatement," Research in International Business and Finance, vol. 80, p. 103135, 2025, doi: 10.1016/j.ribaf.2025.103135.
[24] R. Barber and D. Hollie, "Does Order Backlog Matter for Financial Reporting Quality? Evidence from Revenue Restatements," Advances in Accounting, vol. 53, pp. 526-539, 2021.
[25] S. Demirkan, "Restatement Announcements and Investors Size," University of Texas at Dallas, 2017.
[26] M. Umar, N. Mirza, and S. Navarrete, "The Impact of Financial Restatements on Sell-Side Recommendation Accuracy," Finance Research Letters, vol. 55, pp. 868-879, 2023.
[27] S. Clor-Proell, N. MacKenzie, and K. Renn, "Invest in What You Know? How Customer Investors React to Corporate Restatements," Accounting, Organizations and Society, vol. 111, pp. 101-120, 2023.
[28] N. Kim and J. D. Arthurs, "Repairing Trust: Corporate Communication Strategies after Financial Restatements," Management Decision, vol. 64, no. 3, pp. 851-878, 2025.
[29] S. Richardson, I. Tuna, and M. We, "Predicting Earnings Management: The Case of Earnings Restatements," Social Science Research Network, 2019.
[30] I. Dutta, S. Dutta, and B. Raahim, "Detecting Financial Restatements Using Data Mining Techniques," Expert Systems with Applications, vol. 90, pp. 374-393, 2021.
[31] S. Chen and H. Chen, "Stock Market Prediction Using Artificial Neural Networks: A Survey," Neural Computing & Applications, 2011.
[32] N. Maharlouei and M. Nazari, "Financial Distress Prediction Using Neural Networks and Traditional Models," ed, 2016.
[33] M. J. Saei, M. A. Bagherpour, and S. N. Mousavi, "Examining the Frequency and Importance of Financial Statement Restatement," Financial Accounting Research, vol. 5, no. 1, pp. 67-86, 2014.
[34] M. Plumlee and T. Yohn, "An Analysis of Underlying Causes of Misstatements," University of Utah and Indiana University, 2020.
[35] M. Ettredge, Y. Huang, and W. Zhang, "Earnings Restatements and Differential Timeliness of Accounting Conservatism," Journal of Accounting and Economics, vol. 61, no. 2-3, pp. 295-316, 2016.
Downloads
Published
Submitted
Revised
Accepted
Issue
Section
License
Copyright (c) 2025 Masood Askarzadeh (Author); Karim Nakhaei; Habibollah Nakhaei , Mohammadreza Gholamzadeh (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
