The Research On The Disclosure Of Key Audit Matters,Corporate Governance And Earnings Quality

Traditional audit reports have been questioned in terms of format,content and information communication(Church et al.,2008;PCAOB,2013;Carson et al.,2013;Zhang Jixun,etc.,2016).The focus of the query is that there is a trend of homogeneity in the report format and opinion type,which makes it difficult for investors to obtain the risk assessment and analysis process behind the audit opinion(Humphrey et al.,2009;PCAOB,2013),so that they can not effectively use the audit information to make investment decisions.In recent years,the United States,the United Kingdom,Europe and other countries have introduced policies to reform the audit report,and the reform of audit report has gradually attracted the attention of all sectors of society.On January 8th,2016,the China Association of Certified Public Accountants also issued the draft of "China Certified Public Accountants Auditing Standard No.1504-communicating key audit matters in audit reports".On December 23 rd,2016,the Ministry of Finance issued the new auditing report standard.The purpose of disclosing key audit matters is to pass some specific audit work implemented by the certified public accountant to the users,so that the expected users can obtain more incremental information,thus improving the information content.Earnings quality is the key part of accounting information,which is concerned and recognized by investors in the capital market.The improvement of earnings quality is also of positive significance for the protection of the interests of all stakeholders in the company.Therefore,this paper mainly studies the economic consequences of the disclosure of key audit matters under the new audit reporting standards from the perspective of earnings quality,so as to evaluate the implementation effect of the policy more deeply.Corporate governance includes not only the relevant rules and regulations arrangement and organizational structure within the company,but also the formal and informal institutional arrangements and mechanisms outside the company.Scholars mainly focus on the internal governance of traditional corporate governance,but the increasing development of capital market and the gradual improvement of external supervision environment make scholars pay more attention to the external governance.In the background of China’s system and market environment,the relationship between corporate governance and earnings quality is still worthy of study,and the difference between internal and external corporate governance may have a different impact on the relationship between the disclosure of key audit matters and earnings quality of listed companies.Based on the background of the implementation of the new audit reporting standards in 2017,this paper selects the listed companies in Shanghai and Shenzhen stock exchanges from 2015 to 2017 as the research samples,and examines the relationship between the disclosure of key audit matters and the earnings quality of listed companies.It is found that the disclosure of key audit matters can inhibit the earnings management and improve earnings quality,and this main conclusion is still true after a series of robustness tests.On this basis,this paper focuses on the four aspects of Corporate Governance.It is found that: in the listed companies under the management of non-founder,disclosure of key audit matters plays a more significant role in restraining earnings management and improving earnings quality.To some extent,it can show that the implementation of the new audit reporting standards can alleviate the problems caused by non-founder management.In addition,the effect of disclosure of key audit matters on earnings quality is more obvious in groups with poor investor protection level,weak market competition intensity and companies with low media attention.In groups with high competition intensity and high media attention,the effect of disclosure of key audit matters on earnings quality is not played,which shows that the reform can make up for the shortcomings of external governance.At the same time,this paper also finds that in the group with better investor protection level,the disclosure of key audit matters has a negative impact on the quality of earnings.This shows that the moral permission theory proposed by Asbahr&Ruhnke(2017)has been verified.This paper further analyzes the impact of the detailed degree of key audit matters on the earnings quality of listed companies,and finds that: the more detailed the content of key audit matters disclosed,the worse the earnings quality of enterprises,and the research conclusion supports the "disguise-effect" hypothesis.This paper enriches the empirical research on corporate governance and earnings quality to a certain extent,and its research conclusions also have enlightenment significance for policy makers,certified public accountants,listed companies and other market entities.