Informational Value In Critical Audit Matters

From 2017 on,Chinese public companies are required to include critical audit matter in financial report.The policy aims to improve transparency in auditing and provide more relevant information for expected report users,so this paper here studies the informational value in critical audit matters and the policy working effects.This paper empirically studies the actual situation of Chinese critical audit matters and that,how certain traits in Chinese critical audit matters' disclosure and contents affect company investments by institutional investors.And the study shows that:(1)Situations of critical audit matters differs in companies.(2)Length and removal of critical audit matters have positive influences on company investments by institutional investors,its specification(in industry)and its identifying reasons have negative influences on investment decisions by institutional investors.(3)Further study shows that the above influences differ through-out years and they only exist in lower informational transparency and non-big four auditing samples.(4)Certain traits in Chinese critical audit matters reveal audit qualities,earning-management or company specific risks,and that are possible explanations for the above influences.This paper offers general knowledge of critical audit matters,studies the informational value in critical audit matters,verifies the policy working effects and hopefully provides some reference for future studies and applications.