A lot of research attempts to explain whether earnings is high quality. Earnings quality, some would say, is largely unobservable. Thus, researchers must come up with a proxy measure for earnings quality. Suppose a researcher defined low quality earnings for a given year if the company later restated the earnings. So, imagine a set of data containing financial information for 1000 companies. If a company restated those earnings, the authors classify the earnings as low quality. If a company does not restate, the earnings are not classified as low quality.
Explain both the pros and cons of measuring earnings quality using restatements as a proxy for earnings quality.