The impact of key audit matter reporting on analyst forecast accuracy and forecast dispersion: evidence from Chinese listed firms

IF 2.8 3区 管理学 Q2 BUSINESS, FINANCE
Zhiying Hu, Yan Li, Beixin Lin, G. Kleinman
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引用次数: 2

Abstract

Purpose The purpose of this study is to investigate the decision usefulness of key audit matters (KAMs) disclosures from the perspective of financial analysts. Design/methodology/approach Using data from two groups of Chinese-listed firms subject to different audit standards, the authors use a quasi-natural experiment and the difference-in-differences approach to examine the impact of KAMs on analyst forecasts. The authors also conduct a textual analysis on management disclosures as well as on the content of KAM disclosures. Findings The results of this study show that both forecast errors and dispersion have significantly declined for the firms disclosing KAMs compared to the firms without such disclosures. Further analysis presents evidence that KAM disclosures have resulted in simultaneous increase in management disclosures and audit quality. In addition, auditor characteristics, such as auditor’s dependence on client fees and its industry specialization, and firm’s characteristics, such as its ownership structure and its social connection with the auditor, appear to affect the informativeness of KAM disclosures. The authors also perform content analysis of KAMs to provide additional insight. Research limitations/implications As AH firms are required to adopt the expanded audit report one year before A shares firms, by design, there is only one year in which these two types of companies differ. Therefore, the results without overgeneralizing the impact of KAM disclosures should be interpreted. In addition, this study involves the Chinese market alone and, therefore, may be affected by factors peculiar to the functioning of the Chinese economy and financial markets. Originality/value The main contribution of this study lies in highlighting the salience of KAM context in shaping the relationship between auditors, managers and analysts and its collective impact on information environment. The findings of this study are significant in that they help establish the importance of KAM disclosures in helping to assure that higher quality financial information is available to capital markets, as well as information that is otherwise unavailable given disclosure mandates in China. This study adds to the literature on the importance of providing additional means of safeguarding auditor independence and on the value of auditor expertise in providing useful content in audit disclosures. Moreover, the findings suggest that the expanded audit report can help reduce the level of asymmetric information, especially for state-owned entities. They provide insight on how the new audit rule influences managers and auditors communicating complex accounting matters as well as the moderating effect of the social connections between auditors and firm executives.
关键审计事项报告对分析师预测准确性和预测离散度的影响:来自中国上市公司的证据
目的本研究旨在从财务分析师的角度研究关键审计事项披露的决策有用性。设计/方法/方法利用来自两组不同审计标准的中国上市公司的数据,作者使用准自然实验和差异中的差异方法来检验KAM对分析师预测的影响。作者还对管理层披露以及KAM准则披露的内容进行了文本分析。研究结果本研究的结果表明,与没有披露KAM的公司相比,披露KAM公司的预测误差和离散度都显著下降。进一步的分析表明,KAM准则的披露同时提高了管理层的披露和审计质量。此外,审计师的特征,如审计师对客户费用的依赖性及其行业专业化,以及公司的特征,例如其所有权结构和与审计师的社会联系,似乎会影响KAM准则披露的信息性。作者还对KAM进行内容分析,以提供更多的见解。研究局限性/含义由于AH公司被要求在A股公司之前一年采用扩大的审计报告,根据设计,这两种类型的公司只有一年的时间不同。因此,应在不过度概括KAM准则披露影响的情况下对结果进行解释。此外,本研究仅涉及中国市场,因此可能受到中国经济和金融市场运作特有因素的影响。原创性/价值本研究的主要贡献在于强调KAM准则在塑造审计师、经理和分析师之间的关系方面的重要性,以及它对信息环境的集体影响。这项研究的发现意义重大,因为它们有助于确定KAM准则披露的重要性,有助于确保资本市场能够获得更高质量的财务信息,以及在中国的披露要求下无法获得的信息。这项研究增加了关于提供额外手段保护审计师独立性的重要性以及审计师专业知识在审计披露中提供有用内容的价值的文献。此外,调查结果表明,扩大的审计报告有助于降低信息不对称的程度,尤其是对国有实体而言。它们深入了解了新审计规则如何影响沟通复杂会计事务的管理者和审计师,以及审计师和公司高管之间社会关系的调节作用。
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来源期刊
CiteScore
5.40
自引率
13.80%
发文量
45
期刊介绍: The key areas addressed are: ■Audit and Assurance (financial and non-financial) ■Financial and Managerial Reporting ■Governance, controls, risks and ethics ■Organizational issues including firm cultures, performance and development In addition, the evaluation of changes occurring in the auditing profession, as well as the broader fields of accounting and assurance, are also explored. Debates concerning organizational performance and professional competence are also covered.
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