Research On The Impact Of Disclosure Of Key Audit Matters On The Financing Of Listed Companies

The traditional "pass/reject" model of audit reports hinders the transmission of information between the CPA and external information users due to its highly procedural features.For the report users,almost no valuable information is obtained.The purpose of reducing the information asymmetry between the company's management and the report user cannot be achieved.Since 2013,the British Financial Reporting Council,the International Auditing and Assurance Standards Board and the American Public Company Accounting Oversight Committee have successively revised and issued new auditing standards,requiring auditors to disclose information related to the risk of material misstatement or other similar key audit matters.In our country,the Ministry of Finance also promulgated the "Chinese Auditing Standards for Certified Public Accountants No.1504-Communicating Key Audit Matters in Audit Reports"(referred to as "Auditing Standards 1504")at the end of 2016.The 1504 Auditing Standard requires CPAs to select the most important and critical matters that they believe need to be reminded of the information users' attention during the audit based on professional judgment and through communication with the management,and to disclose them as key audit matters.In addition,the CPA's countermeasures must also be disclosed at the same time.The standard is implemented in batches: A+H-share and H-share listed companies will be implemented from January 1,2017;other listed companies will be implemented on January 1,2018.The revision of the auditing standards and the expansion of the audit report content are intended to increase the relevance of its information value,make the audit work more transparent,and the audit report content to be more informative and unique,thereby enhancing the user's confidence of the company's financial information.Also to maintain the stability of the financial market and the healthy operation of the capital market.Currently,the research on key audit matters mainly focuses on the impact on investors,banks and other external information users and auditors.However,listed companies as disclosure targets of key audit matters,are one of the important market entities,will the disclosure of key audit matters affect the listed company and its management?Based on the disclosure purpose of key audit matters,this article takes the financing of listed companies as the research object.On the basis of summarizing the current situation of key audit matters disclosure in the past three years,firstly,the financial status of listed companies,the quality of accounting information,the level of corporate governance and the nature of property rights are discussed.As well as the characteristics of auditors,we systematically study the factors that affect the disclosure of this matter;secondly,using "listed company financing costs—financing constraints—cash holdings" as the logical main line,study whether the disclosure of key audit matters will ease the problem of "difficult financing and expensive financing" in turn affects the level of cash holdings of listed companies.Again,this article studies what type of listed companies this impact will happen to and how this impact will occur.In addition,this article will conduct an in-depth study of the impact of key audit matters on the financing and cash holdings of listed companies from the aspects of the number of key audit matters disclosed,the content of the disclosure and the types of disclosure.Finally,based on the research in this article,corresponding suggestions are put forward for the standard-setters and implementers of key audit matters.Specifically,the research conclusions are summarized as follows:(1)Different influencing factors have different impacts on the disclosure of key audit matters.Specifically,when the listed company have better operating performance and smaller financial risk,the ownership belong to state-owned,and the auditors from the four major international companies,the fewer key audit matters was disclosed;and when the listed company is at a loss and is inquired by the stock exchange,the greater number of key audit matters was disclosed;when the financial risk of a listed company is smaller,the proportion of independent directors is higher,the property rights are owned by the state-owned,and the auditor's tenure is longer,and the auditors are from the four major international organizations,the auditor's response measures will be fewer;and when a listed company is at a loss,is inquired by the stock exchange,when the chairman is concurrently appointed as the general manager,and when the auditor's industry expertise is strong,the auditor's response measures will be more;the smaller the financial risk of the listed company,the higher the proportion of independent directors,when the property rights belong to the state-owned and the auditor's term of office is long,the auditor's description of the key audit matters is relatively simple;when the listed company is in a loss,is inquired by the stock exchange,the chairman and general manager are the some person,the auditor have strong industry expertise and come from the four major international companies,the more detailed the description of the matter;when the listed company's financial risk is smaller,the proportion of independent directors is higher,the property rights belong to the state-owned,the auditor's tenure is longer and the auditors are from the four major international companies,the audit response measures are relatively simple;when listed companies have a higher level of earnings management,are inquired by the stock exchange,the chairman as a general manager and auditors have strong industry expertise,the more detailed the response measures.(2)The disclosure of key audit matters can significantly reduce the debt financing costs of listed companies.The effect of this reduction is most obvious when the information environment of listed companies is poor,bankruptcy risk is high,financing constraints is large,and size is small and medium.At the same time,different types of key audit matters have different impacts on debt financing costs.Key audit matters at the company level related to mergers and acquisitions,major asset transactions and control issues will significantly reduce debt financing costs,while key audit matters at the account level related to asset disposal and period expenses will increase debt financing costs.Furthermore,after controlling auditor's positive and conclusive evaluation of such matters,key audit matters related to mortgage assets will increase the cost of debt financing.In addition,if auditors have disclosed more number key audit matters,more adequate of the key audit matters and the auditor's response measures,the cost of debt financing of listed companies is reduced even more.(3)Disclosure of key audit matters can further ease the degree of financing constraints,and this mitigation effect is more obvious in listed companies with poor information environment;at the same time,the degree of financing constraints of listed companies with short listing years,greater industry competition,and higher financial risks is reduce significantly when key audit matters disclosed.It is further discovered that when the key audit matters,such as asset disposal,period expenses and government subsidies,as well as investment,equity changes and debt restructuring are disclosed,the degree of financing constraints of listed companies will increase;while the key audit matters,such as depreciation and amortization,and revenue recognition are disclosed,the degree of financial restraint of the listing company will reduce;finally,the more detailed the description of key audit matters and auditors' response measures,the more information provided,the more obvious the degree of financial restraint of listed companies will be reduced.(4)The disclosure of key audit matters ultimately reduces the level of cash holdings.When the listed companies with internal control defects,higher earnings management,and lower total asset turnover,this reduction effect is more obvious;at the same time,when the board of directors of listed companies is small,the remuneration of directors and supervisors is lower,and the number of shareholder meetings is relatively low,the disclosure of key audit matters has a more obvious reduction effect on the level of cash holdings.Further,the key audit matters of asset impairment loss and cost measurement at the account level and the key audit matters of corporate mergers and acquisitions at the company level will significantly reduce the cash holdings of listed companies,the recognition and measurement of related liabilities,government subsidies,income recognition,other matters at the account level,and key audit matters of debt restructuring will increase the level of cash holdings of listed companies.Finally,the greater the number of key audit matters disclosed,the more obvious the effect of reducing the cash holdings of listed companies;however,the level of detail of key audit matters and auditors' response measures has no significant impact on it.The innovations and contributions of this research are:(1)Based on the 1504 audit standard as the research background,this paper establishes an analysis framework for the usefulness of external decision-making and the effectiveness of internal management and governance of key audit matters in listed companies based on financing-related theories,and enriching the audit system theory;at the same time,combining financing related theories and risk information disclosure related theories to study audit information,further enriching the audit information theory,and providing a theoretical basis for in-depth understanding of the connotation and purpose of the audit standard;(2)From the perspective of the impact of key audit matters on the financing of listed companies,this paper proposes a logical chain of "listed company financing costs—financing constraints—cash holding level",and conducts research on this basis,which not only reveals “the information asymmetry mitigation effect”of the key audit matters,also discovered “the information governance effect” of this matter,enriched the research on the impact of key audit matters,and expanded the research on the governance effect of the information disclosure mechanism on listed companies,in order to provide theory and experience for further strengthening the information disclosure mechanism of listed companies;(3)This article not only examines the disclosure status of key audit matters,but also examines the influencing factors and information consequences of the matters.It explores the effect of macro-level policy implementation from micro-evidence,and at the same time looks at existing problems,in order to further deepen the audit report reform,revision and improvement of the 1504 auditing standards provide policy enlightenment and provide theoretical basis for guiding auditors to efficiently implement the audit standards and optimize the disclosure of audit information in practice.(4)The research in this article is not limited to traditional multiple regression methods.It also adds a unique text analysis method to the information characteristics of key audit items,providing practical and reliable empirical evidence for in-depth investigation of the information content and information function of key audit items.At the same time,on the basis of this research conclusion,some problems in the current disclosure of key audit matters have been discovered,and relevant suggestions and opinions have been put forward in a targeted manner.