Research On The Influence Of Key Audit Disclosure System On Corporate Earnings Management Behavior

Management may not only use accounting policies and accounting estimates to carry out accrued earnings management,but also directly manipulate the business activities of enterprises to carry out real earnings management.External supervision may lead to the alternate use of two different ways of earnings management,and may also affect the information of future earnings contained in earnings management.China’s Ministry of Finance issued new audit reporting standards in December 2016,proposing that certified public accountants need to disclose key audit matters in the audit report.The disclosure of key audit matters is an important change in the mode of audit reporting,which constitutes an important deterrent and constraint to auditors and management,which not only improves the communication value of audit reports,but also plays a certain supervisory role to management.Therefore,the revelation of key audit matters may have a significant influence on management’s earnings management behavior.This paper examines the impact of disclosure of key audit items on earnings management of listed companies by using the method of propensity score matching(PSM)and double differential regression(DID)based on the institutional background of the first disclosure of key audit items in 2017.It is found that the disclosure of key audit items helps to reduce the level of accrued earnings management and improve the level of real earnings management,and this effect is more significant in companies with lower quality of internal control.it shows that the disclosure of key audit items improves the degree of real earnings management by limiting the space of accrued earnings management.In addition,this paper further discusses whether the key audit items will affect the relationship between earnings management and future earnings.The results show that the disclosure of key audit items enhances the correlation between real earnings management and future earnings.Further research shows that this effect mainly exists in companies with high risk of key audit items and low quality of corporate audit and internal control.it shows that key audit items may enhance the motivation of management to transmit private information through earnings management by revealing corporate risk.The conclusion of this paper shows that the disclosure of key audit items will not only promote enterprises from accrual earnings management behavior to real earnings management behavior,but also enhance the correlation between real earnings management and future earnings.The research of this paper expands the research on the economic consequences after the implementation of the key audit event system.at the same time,it also provides a certain reference for optimizing the implementation of key audit disclosure system,improving audit quality and internal control quality,and investors to make better use of key audit disclosure information.