Do Key Audit Matters Provide Incremental Information To Investors?

As one of the core issues in the field of empirical research,information content mainly discusses whether the public disclosure of a certain information will have a significant impact on the decision-making of information audiences(such as stock investment,bank loans,etc.).If the information audience changes the original decision because of the public disclosure of the information,then we believe that the information has information value(the information content is valid).As one of the effective measures to reduce fraud and balance information asymmetry,auditing carries the expectations of users of audit reports.However,the complexity of daily business of enterprises has gradually increased,and during the preparation of financial statements,the management estimates and judgments have been expanding.In addition,corporate fraud and fraud have emerged continuously,and the information content of standard audit reports has been difficult to meet the information usage.Furthermore,the audit report only delivers audit results with a short number of lines in a standard format,and its responsibilities and effectiveness in delivering the information are greatly discounted.To improve the information content of the audit report,countries like the United Kingdom and the United States have put the work of revising the new auditing standards on the agenda.At the same time,the International Auditing Standards Board(IASSB)revised and published the new International Auditing Standards in 2015.The purpose of this revision is to increase the information content of audit reports.Among them,two most critical changes are that the new audit reports are required to state audit opinions directly and increase the content of key audit matters.The China Auditing Standards Development Organization(CASB)also revised and promulgated new audit reporting standards in 2016,which was first implemented on A+H listed companies on January 1,2017 and will be covered all listed companies within Chinese board on January 1,2018.In the article "China CPA Auditing Standard 1504",it is pointed out that the communication of key audit matters aims to increase the communication value of the audit report by improving the transparency of the executed audit work.Communicating key audit matters not only provides additional information to prospective users of financial statements,but also helps them understand the areas of audited entities and audited financial statements that involve significant management judgments.However,can the implementation of the new audit reporting standards really bring incremental information to prospective users of financial statements? From the perspective of investors,will the reaction of the capital market show significant differences due to the disclosure of different types of key audit matters? In the content of key audit matters,what role does the accounting firm that issued the audit report and the listed company's own equity nature play? That is,whether the key auditing matters will result in significant differences in information content due to the differences in the accounting firm or the equity nature of listed company? Based on the introduction of the new audit reporting standards and the definition of key auditing matters,this paper takes the key auditing matters disclosed in the A-share listed company's 2016-2017 annual report as the research object,and uses the event research method as well as multiple regression method to answer the above questions.The main conclusions of this paper are as follows:(1)The disclosure of key audit matters can improve the information content of the audit report to a certain extent,and the increase of the information content will cause a positive reaction in the capital market.(2)In the key audit items currently disclosed,investors have the strongest reaction to the asset impairment item and the revenue recognition item,and basically have no reaction to the asset class,tax and expense items and other issues.(3)The size of the audit firms will affect the information content of key audit matters: If the audit firm is one of the Big Four accounting firms,its key audit matters will strengthen the positive response of the capital market;Among eight key audit matters,the size of audit firms influences the income segment and the expense segment most.(4)The nature of equity has few influence on the information content of key audit matters,and its influences is only effective in the short term.In other words,the background of state-owned enterprises can strengthen the positive market reaction caused by key audit matters;among eight key audit matters,influences of nature of equity on key audit matters for asset impairment is most significant.