The Disclosure and Consequences of US Critical Audit Matters

• 成果类型: Article
• 署名作者: Burke, Jenna J.; Hoitash, Rani; Hoitash, Udi; Xiao, Summer (Xia)
• 署名单位: University of Colorado System; University of Colorado Denver; Bentley University; Northeastern University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0013
• 发表日期: 2023
• 页码: 59-95
• 关键词: internal control; LITIGATION RISK; determinants; paragraphs; language

摘要

This study uses difference-in-differences (DiD) analyses to examine the consequences of adopting the U.S. critical audit matter (CAM) disclosure requirement for preparers and users of financial reports. The CAM requirement is one of the largest expansions of the U.S. audit report since the 1940s. We document significant changes to financial statement footnotes referenced by CAMs, which suggests an indirect consequence where management disclosure changes in areas that are expected to be scrutinized following auditor-provided disclosure. Results also suggest that, on average, CAM disclosures do not provide incremental information to the market. To further examine market reaction, we develop well-specified prediction models for the expected number and subject areas of CAMs. We find limited initial evidence that the market reacts negatively when unexpected CAMs are disclosed. Overall, our findings provide insights on the new CAM standard and particularly demonstrate its relevance to management disclosure decisions and to the market.