Do Firms Respond to Auditors' Red Flags? Evidence from Goodwill Impairment Key Audit Matter Disclosures

• 成果类型: Article; Early Access
• 署名作者: Andreicovici, Ionela; Jeny, Anne; Lui, Daphne
• 署名单位: IE University; IESEG School of Management; ESSEC Business School
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2020-0437
• 发表日期: 2025
• 关键词: voluntary disclosure; CORPORATE DISCLOSURE; bartik instruments; earnings; QUALITY; CONSEQUENCES; paragraphs

摘要

We investigate the link between the expanded audit report and firms' financial disclosure decisions, focusing on auditors' mentions of goodwill impairment as a key audit matter (KAM). Drawing from a sample of the United Kingdom Premium Listed companies with goodwill on their balance sheets during 2014-2019, we identify instances where goodwill impairment is flagged as a KAM and contrast firms' disclosure levels on goodwill impairment using textual measures constructed from information in their annual reports. We find that firm disclosure on goodwill impairment increases (decreases) when auditors start (stop) mentioning goodwill impairment as a KAM. The increase in disclosure is more pronounced in the presence of stronger external information demand and better internal governance. Finally, firms are more likely to impair goodwill in the period following auditors' mention of goodwill impairment as a KAM. Overall, this paper establishes the role of the expanded audit report for firm disclosure.