The Relationship between Disclosure of Key Audit Matters and Earnings Quality

• Main Authors: Chih-Chung Cheng, 鄭智中
• Other Authors: 林嬋娟
• Format: Others
• Language: zh-TW
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/94e947

碩士 === 國立臺灣大學 === 會計學研究所 === 106 === This paper examines the relationship between the disclosure of Key Audit Matters in audit report and earnings quality. On 2016, Financial Supervisory Commission requires that auditors of companies listed at stock exchange market or over-the-counter market should issue the new audit report based on Auditing Standard NO. 57. Under the new audit report, accountants must disclose Key Audit Matters (KAM), the most significant matters in the audit of the financial statements of the current period, in order to enhance the communicative value of the audit report. This study believes that the additional information provided through the disclosure of KAM would help reduce the level of earnings management. This study uses abnormal accruals as a proxy for earnings quality to investigate whether the earnings quality improves after the adoption of new audit report in 2016, comparing to that of 2013-2015. Our empirical results show that there is a significant negative association between the disclosure of KAM and abnormal accruals. However, the level of quality improvement is insignificant between companies with higher reporting quality and those with lower reporting quality. This study does not find significant association between earnings quality and total number of KAM in auditor’s report, but significant association is documented with the number of KAM related to current assets, particularly in Impairment of Accounts Receivable. To sum up, the disclosure of KAM is found to be able to mitigate the earnings management, resulting in a better earnings quality.