Research On Economic Consequences Of Disclosure Of Key Auditing Matters

The International Auditing and Assurance Standards Board IAASB issued a series of international auditing report guidelines in 2015,which stipulates that new models of audit reports will be used starting December 15,2016.The new standard requires auditors to issue more informational audit reports for the audited units.The IAASB expects to disclose the key audit matters through the new standards and enhance the public's confidence in the fairness of the financial statements and the practice of certified public accountants.In January 2016,the CICPA released the draft guidelines for the review of the audit report.In December 2016,the Ministry of Finance of the People's Republic of China approved the issuance of a series of auditing standards formulated by the China Insurance Association,including a newly-developed standard,"China's Certified Public Accountants Auditing Standard No.1504-Communicating Key Auditing Matters in the Audit Report" and The other six criteria for making substantive amendments.Descriptive statistics were disclosed through the disclosure of key audit items in the 2016 annual report.The study found that asset impairment items and revenue recognition items are important audit matters for various industries.This paper uses the 2015-2017 standard to implement the transition period and uses two methods to verify the economic consequences of the key auditing disclosures.The first is to use the company and the matching sample of key audit matters disclosed in the 2016 annual report to conduct a comparative analysis of the key auditing matters disclosed in the same fiscal year.The difference between the two is to use the 2015 ANNUAL REPORT and 2017 ANNUAL REPORT data of the A-share non-financial listed companies to study the differences before and after implementation of the key audit matters.This paper quantifies the economic consequences of the disclosure of key auditing items from three aspects:market response,auditing costs,and audit quality.It selects the cumulative average excess return rate as the proxy for market response,and the accrued accrual profit calculated from the modified Jones model as the audit quality.The substitution variable.The study concluded that the disclosure of key auditing events brought about a more positive market response,increased audit fees and improved the quality of the audit;and further examined the impact of asset impairments and disclosure of revenue recognition items on key audit items:Asset impairment The positive impact of events on market response,audit fees,and audit quality is significant;revenue recognition matters have a positive impact on market reactions.The study of this paper has certain practical significance:First,the improved audit report can achieve the expected goals of the standard formulation.Disclosure of key auditing matters can provide effective information for users of accounting information,help them understand the most important matters in the audit of current financial statements identified by certified public accountants,and can also help users of accounting information identify the managements involved in the audited financial statements.Second,the study on the increase of audit fees after the implementation of the key audit matters in practice will help deepen investors' understanding of auditing standards and help regulators verify the audit fees.Third,the improvement of audit quality through the disclosure of key auditing matters has helped enhance auditors'understanding of the key audit matters(CAS 1504)and reminded CPAs to remain substantially independent in the audit process.