Publication Type
Journal Article
Version
submittedVersion
Publication Date
8-2024
Abstract
This study examines whether the key audit matters (KAMs) disclosed in expanded audit reports as a part of recent regulatory reforms are informative for investors in an emerging economy setting. Using the recent adoption of expanded audit reports for firms listed exclusively in Mainland China, we find robust evidence that the abnormal trading volume and earnings response coefficients (ERCs) are higher and that stock price synchronicity is lower during the postadoption than preadoption period. In additional tests, we find evidence that KAMs are more informative for non-state-owned enterprises (non-SOEs), smaller firms, and firms with a smaller analyst following. Finally, we find that investors respond to the characteristics of KAM disclosures, providing corroborative evidence of the informativeness of these disclosures. Overall, our study provides systematic evidence that KAMs are incrementally informative for investors in an emerging economy.
Keywords
Expanded audit report, information content, key audit matters.
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
Publication
Auditing: A Journal of Practice & Theory
Volume
43
Issue
3
First Page
139
Last Page
164
ISSN
0278-0380
Identifier
10.2308/AJPT-2020-099
Publisher
American Accounting Association
Citation
GOH, Beng Wee; LEE, Kiat Bee Jimmy; LI, Dan; and WANG, Muzhi.
Informativeness of key audit matters: Evidence from China. (2024). Auditing: A Journal of Practice & Theory. 43, (3), 139-164.
Available at: https://ink.library.smu.edu.sg/soa_research/2028
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2308/AJPT-2020-099