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

• 成果类型: Article
• 署名作者: Dee, Carol Callaway; Luo, Bing; Wang, Elaine; Zhang, Jing
• 署名单位: Stetson University; California State University System; San Francisco State University; University of Massachusetts System; University of Massachusetts Amherst; University of Colorado System; Children's Hospital Colorado; University of Colorado Anschutz; University of Colorado Denver
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101; 1879-1980
• DOI: 10.1016/j.jacceco.2025.101834
• 发表日期: 2026-04
• 页码: 101834
• 关键词: Critical audit matters; Internal control material weaknesses; internal control quality; Account-level controls; Entity-level controls; financial reporting quality; corporate governance; control deficiencies; disclosure; determinants; paragraphs; weaknesses; Managers

摘要

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.