As noted above, restatements are often viewed as indicative of internal control
problems. However, little research examines the determinants of restatements. Again,
Kinney and McDaniel (1989) and DeFond and Jiambalvo (1991) document negative
univariate associations between restatements and size and profitability. In addition,
Richardson et al. (2003) examine the determinants of income-decreasing restatements
using a sample of 225 restatement firms with 440 restatements from 1971 to 2000. The
authors find that neither size nor profitability varies between their test and control firms