Research On The Impact Of Key Audit Matters On Audit Quality

In order to improve the information content of the audit report and based on the specific requirements of international auditing standards,the Ministry of Finance of China issued a new standard for audit reports in December 2016,"Chinese Certified Public Accountant Auditing Standards No.1504",which requires certified public accountants to communicate key audit matters in the audit report.It is required that China's A+H-share listed companies take the lead in implementing this standard from January 1,2017,and will be fully implemented in A-share listed companies from 2018.In the context of audit report reform,this paper analyzes the impact of key audit issues on audit quality based on the principal-agent theory.First,companies that have implemented the new audit reporting standards from 2017 to 2019 are selected as samples.We analyze and summary the specific circumstances of the key audit matters disclosed in the audit reports of the sample companies.They are mainly divided into three aspects.The number of key audit matters disclosed in the audit reports of listed companies in China is concentrated in two point.The largest number of key audit matters disclosed was in the financial industry.As for the content,"asset impairment" and "revenue recognition" are the most disclosed in the audit report.From the perspective of response procedures,inspections are the most widely used audit procedures.CPAs have performed inspections on more than 90%of key audit matters.Later,this article uses multiple regression analysis to study the impact of key audit events on audit quality from the two dimensions of the number and amount of key audit events.The amount of key audit events is further subdivided into "asset impairment" amounts and "revenue recognition" amount.Some results were come from empirical research.First,the number of key audit events will have a positive impact on audit quality.Second,the amount of key audit events in the "asset impairment category" will have a positive impact on audit quality.Third,the amount "revenue recognition" of key audit matters will have a negative impact on audit quality.Fourth,compared to non-losing listed companies,the number of key audit matters and the amount of "asset impairment" communicated by loss-making listed companies will have a negative effect on audit quality.Fifth,the number of key audit matters of small-scale companies will have a negative impact on audit quality compared with large-scale companies.Finally,this article puts forward relevant suggestions and measures based on the research results,and discusses the shortcomings of the article and future research directions.The research in this article expands the related theoretical research on the impact of key audit matters on audit quality,and helps users of audit reports from all parties to better recognize and understand the new topic of key audit matters.Besides,the article is beneficial for relevant policy-making departments to further improve the new audit report and puts forward relevant suggestions for CPAs to better disclose key audit matters.Even further,it provides certain empirical evidence for investors to better interpret audit reports.