Do Investors Respond to the Textual Contents of Key Audit Matters (KAMs) in Expanded Audit Reports?

• Main Authors: HSIAO, YANG-LUN, 蕭暘倫
• Other Authors: WU, SHING-JEN
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/j55h29

碩士 === 東吳大學 === 會計學系 === 107 === This study examines whether new disclosure requirement (i.e., key audit matters, KAM) and its textual readability in an expanded audit report have the incrementally informative effect. Using a sample of Taiwanese non-financial listed companies during 2014-2017 and separating the sample period into pre-regime (2014-2015) and post-regime (2016-2017) periods, we do not find evidence that this change in disclosure requirement significantly affects investor perceptions of earnings quality (i.e., earnings informativeness). Surprisingly, our results show that information asymmetry significantly increased after issuing an expanded audit report. Furthermore, we do not also find that the number of KAMs and textual readability of the KAM section could either increase earnings informativeness or improve information asymmetry. Finally, the results of additional analyses indicate that audit fees are positively associated with the number of words or the monetary disclosure of the related accounts, and negatively associated with the difficult terms or complex semanteme expressed in the KAM section of an audit report. Overall, we argue that capital market investors have different ability to understand and assess various KAMs, and thus lead to the deterioration of information asymmetry and unimproved earnings informativeness.