A Study On The Relationships Between Key Audit Matters And Market Reaction

With the development of the economy and the perfection of the market,the demand for the quantity and quality of information is increasing by the investors.From the Enron incident in 2001 to the financial crisis in 2008,the information contained in the audit report has been questioned by information users.Many investors believe that the information disclosed by CPA in the audit report is imperfect.It is even considered that the audit report is only a form.Therefore,the standard audit report model(pass/fail)has been far from meeting the requirements of the vast number of information users.Since 2011,IAASB has explored how to change the mode of audit report and increase the information content of audit report.Until 2015,IAASB revised the audit standard and carried out a series of changes to the audit report,the most important of which is to increase the Key Audit Matters.On the one hand,China aims to converge with international auditing standards,and on the other hand,to increase the information content of audit reports,on December 23,2016,The Ministry of Finance has also issued new audit guidelines that require Key Audit Matters to be added to the audit report.A+H listed companies are required to implement them from January 1,2017 and other listed companies from 2018.Based on the above policy changes,this paper selects A + H listed companies that disclose Key Audit Matters in 2017 as the research object,mainly to study whether the disclosure of Key Audit Matters can cause market reaction.In this paper,the cumulative excess rate of return(CAR)is used as the explained variable to measure the stock market response,and the disclosure of Key Audit Matters(KAM)is taken as the explanatory variable.The research method of combining normative analysis with empirical test is adopted in this paper.The empirical test is divided into event study method and multiple linear regression method,and the following problems are discussed: Whether the disclosure of Key Audit Matters can cause market reaction or not,and whether the market response caused by the disclosure of Key Audit Matters by the four major accounting firms is more significant than that of non-big accounting firms.After empirical test,the following conclusions are drawn:the disclosure of Key Audit Matters can cause market reaction;compared with the non-big four accounting firms,the market reaction caused by the disclosure of Key Audit Matters by the four major accounting firms is more significant.The contribution of this paper is to test that the disclosure of Key Audit Matters can cause market reaction,increase the information content of audit reports and help investors to make decisions.In addition,this paper also makes recommendations on the disclosure of Key Audit Matters.It is hoped that the disclosure of Key Audit Matters will be more perfect.Due to the policy reasons,there are fewer samples in this study,so we can use more samples to carry out more in-depth analysis.