Do firms incur financial restatements? A recognition study based on textual features of key audit matters reports

This article uses China's A-share nonfinancial listed company reports from 2017 to 2019 as the research sample and analyzes three textual features of key audit matters using machine learning to identify financial restatement behaviors. Results show that firms with a worse level of key audit matter readability, a negative tone, and a greater level of detail had a higher probability of financial restatement behaviors. From this, investors can infer whether firms have strong internal or external monitoring. These correlations reflect the importance of standardized information disclosures and appropriate regulatory programs to safeguard investors' rights and interests.