Tenure Of Signature Accountants And Key Audit Matters Disclosure

The audit report is the product of financial statement audited by the signature accountants.In this round of auditing standards reform,the content of the audit report has been expanded by adding the key audit matters,which provides audit reports with high information content,high transparency,high decision-making relevance and strong usefulness to prospective users based on the public interest.During the whole auditing process,maintaining due independence of the signature accountants is the key to ensuring the high-quality implementation of the new auditing standards.This process should reflect the various characteristics of the signature accountants,among which the tenure of signature accountants is the most important.On the one hand,based on the principle of social interaction vigilance and the learning effect,a moderate tenure is beneficial to improve audit quality;on the other hand,due to the relaxed response and economic dependence of the interaction between familiar people,an excessively long audit tenure will harm the audit quality.Because the long tenure of signature accountants will corrode their independence,domestic and foreign institutions have formulated the signature accountant rotation system to improve the independence of the auditors.However,in order to give full play to the positive effect of the tenure of signature accountants,it is very important to further shorten the tenure of signature accountants under the circumstance that the overall audit quality of our country needs to be improved.That’s why during the two sessions in 2022,Rong sheng Qin a member of the National Committee of the Chinese People’s Political Consultative Conference,proposed a proposal on establishing and improving the mandatory audit rotation system for listed companies,which analyzed the shortcomings of my country’s current 5-year regular rotation system and suggested that the term of office should be further shortened.Therefore,after the implementation of the new auditing standards,it is still a hot topic of empirical research to explore the relationship between the tenure of signature accountants and the quality of audit reports.In the context of the auditing standards reform,existing research is more mainly testing the economic consequences of the standards by market reactions,that is,the impact on investor decision,auditor responsibility,audit clients,and other stakeholders.The research on the influencing factors of key audit matters is mostly carried out from the aspects of the auditor’s gender,rank,and partner status.Although the literature with audit report as the direct research object has increased,the research focuses on the number of disclosed matters and the quasi-natural experiment after the implementation of the standard,while it is rare to take the audit report text as the direct research object.The introduction of the key audit matters section changes the standardized and homogenized audit report mode and makes the audit report heterogeneity possible,which provides an opportunity to study the characteristics of audit reports.Will incremental information continue to be provided after the audit report is reformed? Is there any improvement in the homogenization of audit reports? Therefore,it is of great significance to use text analysis to study the relationship between the tenure of signature accountants and the text similarity of key audit matters.This paper takes the key audit matters section as the research object and uses the text analysis method to explore the influence of the tenure of signature accountants on key audit matters section.Based on the first implementation of the new auditing standards in 2016,the paper calculates the text similarity of A-share listed companies before and after the disclosure of key audit matters from 2017 to 2020 as a research sample,explores the influence of the tenure of signature accountants on the text similarity of key audit matters,and analyze the moderating effect of customer importance degree.Further analysis of whether there is a difference in the correlation between the tenure of signature accountants and key audit matters text similarity when the information environment and internal control quality are different.The findings are as follows:(1)The longer tenure of signature accountants in the audit report of the same listed company,the higher text similarity in the key audit matters section,and the less incremental information provided by the key audit matters,which leads to the homogeneity of the audit report again.(2)The degree of client importance strengthens the positive impact of the tenure of signature accountants on the similarity of the disclosure text of key audit matters.(3)Further analysis also found that in companies with poor corporate information environment and weak internal control quality,the relationship between the tenure of signature accountants and the similarity of the disclosure text of key audit matters is more significant.This study provides empirical evidence for further improving the information disclosure of listed companies,improving the rotation system of signature accountants and optimizing the disclosure of key audit matters.Compared with the existing research,the research contributions of this paper are as follows:(1)Extend the text analysis method to the disclosure of key audit matters.At present,text analysis method is mainly used in MD&A,board reports and other major risk information tips in the annual reports.Few scholars conduct text similarity analysis on audit reports,especially whether the key audit matters provide incremental information.(2)Enrich the research on the factors affecting the disclosure of key audit matters.Most of the existing literature is limited to the perspectives of company characteristics,stock price crash risk,and auditors’ industry expertise.However,from the perspective of the tenure of signature accountants.this paper studies the impact of the tenure of signature accountants on the text similarity of key audit matters,which provides a new idea for improving the implementation quality of the new audit standards.(3)From the perspective of key audit matters,it provides new empirical evidence for the conclusion that there is a Ushaped relationship between the tenure of signature accountants and the accounting earnings manipulation of audited entity.In order to give greater play to the positive effect of the tenure of signing accountants,it is essential to further shorten the tenure of signature accountants.