Using a unique set of banking data containing both originally-reported and subsequently-revised financial variables, we study accounting restatements. Our results indicate the worse a bank's financial condition, the more likely it is for originally-reported data to understate financial losses. Also, we find supervisory exams have an important role in uncovering financial problems and prompting accounting restatements to correct loss underreporting. While revisions are directly related to financial difficulties, exam-based restatements are evident at even the earliest stages of deterioration, indicating substantial accounting misstatements—at both banks and other types of companies—can occur well outside severe business circumstances.

Using a unique set of banking data containing both originally reported and subsequently revised financial variables, we find adverse revisions to accounting statements are associated with downgrades in supervisory ratings. To assess the financial significance of the revisions, we compare the ability of the original and revised data to map into exam ratings. The relationship between accounting data and exam results is significantly stronger for revised data than for real-time data. Our findings document significant differences between real-time and revised banking data, highlight the auditing role of bank exams, and provide a more realistic assessment of early warning model accuracy.