Critical audit matters and internal control quality: The disciplining role of CAM reporting

IF 0.3 Q4 ECONOMICS
Carol Callaway Dee, Bing Luo, Elaine Wang, Jing Zhang
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引用次数: 0

Abstract

We examine whether critical audit matter (CAM) reporting improves internal controls over financial reporting. We propose that CAM reporting improves internal control quality. This is because CAM reporting incentivizes early identification and communication of internal control issues among auditors, management, and audit committees, and increases their attention and effort in high-risk CAM areas. We find that, compared to control companies, companies that implement CAM reporting experience a significant decrease in the likelihood of internal control material weaknesses (ICMWs), and the improvement in internal control quality is primarily at account-level rather than entity-level controls. We also find that CAM reporting significantly lowers the likelihood of accounting misstatements. Cross-sectional analyses suggest that the benefit of CAM reporting on internal control quality depends on audit committee quality and auditor effort. The survey results of audit partners and CFOs provide further support for our theory.
关键审计事项与内部控制质量:CAM报告的约束作用
我们研究关键审计事项(CAM)报告是否改善了财务报告的内部控制。我们建议CAM报告提高内部控制质量。这是因为CAM报告激励了审计师、管理层和审计委员会对内部控制问题的早期识别和沟通,并增加了他们对高风险CAM领域的关注和努力。我们发现,与控制公司相比,实施CAM报告的公司在内部控制重大缺陷(ICMWs)的可能性方面显著降低,并且内部控制质量的改善主要是在账户层面而不是实体层面的控制。我们还发现,CAM报告显著降低了会计错报的可能性。横断面分析表明,CAM报告对内部控制质量的好处取决于审计委员会的质量和审计师的努力。对审计合伙人和财务总监的调查结果为我们的理论提供了进一步的支持。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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