Research On The Relationship Between Key Audit Matter And Earnings Management Of Listed Companies

In recent years,the reform of audit standards to improve audit quality has become an international trend.In response to the higher information quality demand of financial report users of listed companies,China issued 12 new auditing standards in December 2016 after repeatedly soliciting public opinions,among them,China certified public accountants auditing standard no.1504--communicating key audit matters in audit reports has become the core audit change.This standard requires the auditor to list the most important matters and the reasons for the selection and provide corresponding response in the current audit report according to his own professional judgment after full communication with the company's management.The 1504 Guideline will be implemented in two stages,with A+H share listed companies starting from the beginning of 2017 and all other listed companies starting from the beginning of 2018.Based on the new auditing reporting with key audit matters,this paper collects the annual report data of A+H share listed companies and other listed companies in 2015-2016 and assigns 66 A+H share into treatment groups and 113 A share as control groups with propensity score matching method,and then use difference-in-difference method to study the relationship between key audit matters in the new auditing standards and earnings management of listed companies.Having established this,this paper introduces a characteristic variable of management,and selects the annual report data of A share listed companies from 2016 to 2017 as samples to investigate whether the risk preference of managers plays a moderating role between key audit matters and earnings management through hierarchical regression method.This study has two main findings,First,key audit matters in new auditing reporting are significantly negatively correlated with earnings management of listed companies,The disclosure of key audit matters has created conditions for restraining the earnings management of listed companies from the aspects of requiring auditors to put more effort into it,improving the communication between auditors and management,and strengthening the attention of report users to audit matters.Second,high risk preference of managers weakens the negative impact of key audit matters on earnings management.Managers are not "perfectly rational" agents.Managers with high risk preference are usually characterized by overconfidence,and tend to make decisions based on inherent experience and preference in the face of changes in external policy environment,so they are less influenced by external factors.This paper enriches the research on the influence of key audit matters on earnings management of listed companies.The introduction of managers' risk preference provides a new research angle for the combination of external policy changes and internal characteristics of companies.At the same time,this paper provides policy suggestions from the aspects of strengthening the supervision of the implementation of the new auditing standards,improving the information disclosure standards,and strengthening the awareness of internal risks.