The Influence Of Key Audit Matters On Accounting Conservatism

On December 23,2016,the Ministry of Finance approved and issued the'Auditing Standards for Certified Public Accountants of China No.1504-Communicating Key Auditing Matters in Audit Reports'.On January 1,2017,A+H share listed companies took the lead in applying this criterion in their audit reports for use in the Mainland to disclose information on key audit matters.On January 1,2018,all listed companies in Shanghai and Shenzhen Stock Exchanges need to disclose key audit matters in their audit reports.Under the new audit report,the company's risk point is directly face to face with the public through the disclosure of key audit matters.If the financial report is unfair,the management is more likely to be punished by the regulator and bear the legal consequences.To avoid this situation,management may be willing to abandon short-term performance,reduce opportunistic behavior of overstating earnings and net assets,and improve the conservatism of accounting information.At the same time,the generation of conservative accounting information depends to a large extent on the supervision of external independent auditing.In order to verify the reliability of financial statements and prevent potential litigation risks,auditors attach great importance to the problem of overstating the net assets and benefits.In the process of auditing,auditors directly assume that there is a significant risk of misstatement in revenue recognition,in order to avoid management fraud to the greatest extent and reduce litigation risks.The effective risk control strategy of accounting firms is to force auditing clients to maintain a certain degree of conservatism which means confirming bad news in a timely manner.Through empirical research,this paper finds that the requirement of disclosing key audit matters in the new audit report can strengthen the supervisory role of external audit,restrict the big shower behavior of management's financial statements,and then improve the accounting conservatism of listed companies.Then,from the three perspectives of auditor self-discipline,management self-discipline and analysts5 concern,this paper studies the moderating effect of the three on the relationship between key audit matters and accounting conservatism.The findings of this study are as follows.Firstly,from the perspective of auditors'self-discipline,compared with other auditors,the auditors from the four main international auditing firms have not shown higher self-discipline requirements of due diligence,and cannot significantly enhance the positive impact of disclosure requirements of key audit items on accounting conservatism.Secondly,from the perspective of "self-discipline" of management,the dxual role of chairmen and CEO provides management with convenience and power.The level of"self-discipline"of management declines,exerting pressure on auditors to control the disclosure of key audit matters,thus impairing the conservatism principle.Therefore,the dual role of chairmen and CEO will weaken the positive impact of disclosure requirements of key audit items on accounting conservatism.Thirdly,from the analysts' points of view,analysts have not yet formed the power of supervision,and most analysts have an optimistic tendency of inadequate response to negative information.Too much analyst's attention will cause huge external earnings pressure on management.Management is more inclined to take short-term actions to cover up bad news.Therefore,analysts'attention will weaken the requirement of disclosure of key audit items and correct accounting conservatism.Influence.