Research On Market Response Of Key Aduit Matters

Audit report refers to a written document issued by a certified public accountant to express audit opinions on financial statements on the basis of performing audit work in accordance with the provisions of audit standards.As the product of the separation of ownership and management,audit is the information link between management and the public.However,with the continuous escalation of fraudulent financial reporting,the standard audit report is difficult to provide comprehensive information,which has aroused public doubts.In order to maintain the authority of auditing,the financial reporting council of the United Kingdom(FRC),the international auditing and certification standards board(IAASB),the public company accounting oversight board(PCAOB)and other auditing standards bodies have issued new auditing standards.They hope to further expand the content of audit reports and provide more information related to the actual situation of the auditees through the revision of audit standards.After soliciting opinions from all parties,the China Institute of Certified Public Accountants issued revised auditing standards at the end of 2016.In this revision,the biggest change is the addition of "Auditing Standards for Chinese Certified Public Accountants No.1504--communication of key audit matters in audit reports".Due to the short implementation time of the key audit matters criterion,whether the expected effect has been achieved remains a question to be studied.Through reviewing and analyzing the domestic and foreign literatures,this thesis finds that the reaction of the securities market can well measure the investors' attitude towards the key audit matters,and the investors' attitude represents the implementation effect of the key audit matters.Therefore,this paper determines the research direction as the market response of key audit matters.This thesis firstly sorted out the key audit matters in the 2016-2017 annual audit report of A+H shares listed companies.After the overall analysis,it made statistics according to the industry and types of key audit matters,and specifically analyzed the disclosure of key audit matters.Through analysis,this thesis proposes the hypothesis that the audit report containing the key audit matters will trigger more positive reactions in both A and H stock markets than the audit report without the key audit matters.In order to verify the hypothesis,this thesis adopts the method of excess profit method,the market adjustment model was used to calculate the average excess return and cumulative average excess return in the event window of the sample companies before and after the implementation of key audit matters,and the significance test of the average excess return and cumulative average excess return was conducted.The results show that both the a-share market and the h-share market,the key audit items have triggered more positive market reaction,and the key audit items have achieved the expected effect of the standards in practice.The research shows that although the market has responded positively to the key audit matters,there are still some deficiencies in the implementation of the key audit matters.Therefore,this paper puts forward suggestions on improving the key audit matters from the perspectives of certified public accountants,accounting firms and users of audit reports.