Research On Market Response To Disclosure Of Key Audit Matters In Audit Report

In December 2016,the Ministry of Finance of China approved a new auditing standards.Compared with the original auditing standards,the most important change of the new auditing standards is that it required the listed companies to add key audit matters in their auditing reports and disclose the key and difficult points of audit work,and provide personalized information about their audit matters,and explain the reasons and solutions for a certain item which being identified as a key audit matter.Researching on disclosing of the key audit matters has rich significance.In theory,it enriches relevant research results on market reaction of disclosing of key audit matters,and provides some reference for future research.In practice,it provides important reference for listed companies in setting up and disclosing key audit matters.It can also provides reference for improving audit reporting standards for The Accounting Standards Committee and tests the response of disclosure of key audit matters in the Chinese market.Firstly,this paper analyses the requirements of key audit disclosure in the new auditing standards.Through summarizing the literature,it analyses the current research situation of market reaction to key audit disclosure at home and abroad.About the market reaction research of key audit disclosure,the foreign research was earlier.Most studies believe that the stock market regards the disclosure of the key matters as a good signal.After disclosing of key audit matters,the stock price of listed companies will rise.In contrast,there are fewer studies in China.The research results mainly focus on the impact of key audit matters,the existing problems and the suggestions for the problems.Starting with the companies that disclosing key audit matters,this paper studies their impact on stock prices basing on company analysis.It enriches the researching results in this field and provides reference for listed companies to provide more informative audit report by analysis on different key audit matters disclosing.At the same time,it also provides reference for China’s Audit Standards Committee to improve its quantity of audit standards in the future.Reporting guidelines provide some reference.The innovation of this paper lies in using stock price changes as indicators to measure market reaction and using the latest audit report data of listed companies for empirical analysis.Therefore,it is of great theoretical and practical significance to study the reaction of disclosing the key audit in capital market.Based on the theory of information asymmetry,efficient market,signal transmissiontheory and previous research results,this paper proposed two hypotheses.It is assumed that,in general,the disclosing of key audit matters has essentially information content,which can be captured by the market and reflected by the stock price.It also is assumed that the different quantity of the disclosing has different influences on stock prices.The more and more detailed of the disclosing of key audit matters,the higher of the stock price and vice versa.This paper chooses the annual report data of Shanghai and Shenzhen A-share mainboard market in 2017 for empirical analysis.Using descriptive statistical analysis,multiple regression analysis and robustness test,this paper tests the market reaction of different information content of key audit matters and the market reaction of different number of key audit matters,respectively.The empirical results verify the hypothesis of this paper.The research shows that the disclosing of key audit matters will produce market reaction,which will affect stock price fluctuation.The more information content disclosure of key audit items,the more positive market reaction.The more key audit matters that the listed companies disclose in annual audit reports,the more significant of the market reaction.