Are Auditor and Audit Committee Report Changes Useful to Investors? Evidence from the United Kingdom

Reid, Lauren C.

doi:10.2139/ssrn.2637880

Cited by 26 publications

(32 citation statements)

References 46 publications

(82 reference statements)

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“…In the absence of such signals, auditing is at risk of becoming a market for lemons (Akerlof 1970). A recent working paper, Reid, Carcello, Li, and Neal (2015), shows that additional disclosure from ACs and auditors provide useful information to investors in the U.K. In this response we outline the types of information required for a well-functioning audit market.…”

Section: Specific Commentsmentioning

confidence: 98%

“…While there is some possibility that such a disclosure could be provided by the auditor, it would be informative for investors to know what issues the AC found to be most important. This has been found to be relevant to investors in the U.K. (Reid et al 2015). (6) Emerging literature suggests that investors highly value auditor independence (Christensen, Glover, Omer, and Shelley 2015).…”

mentioning

confidence: 99%

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Comments of the Standards Committee of the Auditing Section of the American Accounting Association on the SEC's Concept Release No. 33-9862; 34-75344 File No. S7-13-15, Possible Revisions to Audit Committee Disclosures

Abernathy¹,

Felix²,

Jamal³

et al. 2015

Current Issues in Auditing

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SUMMARY Recently, the Securities and Exchange Commission (SEC) solicited public comments on its Concept Release No. 33-9862; 34-75344 File No. S7-13-15, Possible Revisions to Audit Committee Disclosures. This commentary summarizes the contributors' views on the various questions asked in the SEC's Release. The invitation to comment (which invited comments through September 8, 2015) is available at: https://www.sec.gov/rules/concept/2015/33-9862.pdf. Our comments submitted to the SEC appear below.

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Section: Specific Commentsmentioning

confidence: 98%

mentioning

confidence: 99%

Comments of the Standards Committee of the Auditing Section of the American Accounting Association on the SEC's Concept Release No. 33-9862; 34-75344 File No. S7-13-15, Possible Revisions to Audit Committee Disclosures

Abernathy¹,

Felix²,

Jamal³

et al. 2015

Current Issues in Auditing

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“…They also found that a positive association exists between the audit fee and the number of KAMs disclosed. Reid (2015) reported that companies employing auditors that tend to provide more detailed audit reports have more significant reductions in information asymmetry. Additionally, Sierra-García et al (2019) reported that auditor and client characteristics are determinants of the number of KAMs disclosed and, moreover, determine the type of KAMs disclosed in the audit reports.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This study is to see whether auditors have been performing auditing work more conservatively following the introduction of key audit matters. To analyze the foregoing, based on the model of Reid (2015), this study sets up Model (1) as follows:…”

Section: Empirical Modelsmentioning

confidence: 99%

Key Audit Matters for Production-To-Order Industry and Conservatism

Kim

Park

2020

IJFS

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In this study, the effects of key audit matters (KAMs), one of the measures recently introduced to improve accounting transparency in the production-to-order industry in terms of corporate sustainability, are examined. After the introduction of KAMs, auditors should publicly disclose key audit matters that had been internally judged in the past. In cases where these are missing or misunderstood, the range of the auditor’s liability may increase. Thus, from the viewpoint of the auditor, the description of KAMs can be recognized as the disclosure of internal judgments and an increase in the risk of litigation. It is judged that, to this end, auditors will perform their auditing work more conservatively in cases where they should describe KAMs. The results of analysis of companies to which KAMs are applied indicate that auditors carried out audits more conservatively for such companies. As such, the result can be interpreted as indicating that, due to the introduction of KAMs, auditors evaluate their risk highly and carry out audits more conservatively in order to reduce the risk. This study is meaningful in that it empirically analyzes the effects of the introduction of the recently implemented KAMs. In addition, this study provides implications for enterprises that prepare financial statements, supervisory institutions that conduct supervision, auditors, and capital market participants, as it presents the finding that, with the introduction of KAMs, auditors perform their work with more conservative perspectives. In addition, the findings of this study provide a basis for future studies on KAMs.

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“…Previous studies have examined the communicative value and market reaction towards the release of the independent auditor's report that are prepared in accordance with ISAs,part of these studies have addressed the expanded audit report including the disclosure of KAMs as required by ISA 701; in UK, Reid (2015) examined Whether new disclosure requirements have informative value to investors, overall results show that extended required disclosure provide new and useful information to investors and help in reducing information asymmetry.…”

Section: Literature Reviewmentioning

confidence: 99%

The Investors Reaction to the Disclosure of Key Audit Matters: Empirical Evidence from Jordan

Altawalbeh¹,

Alhajaya²

2019

IBR

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This study aims to examine the investors reaction to the disclosure of key audit matters (KAMs) as mandated by ISA701, the study’s sample consisted of all the (195) public shareholding companies listed in Amman Stock Exchange (ASE) as at the end of 2017, and through which we have conducted a manual content analysis to tracing the auditor practices in reporting KAMs, the final sample consisted of (128) public shareholding companies and for which we used the event study test to examine the study hypothesis, results revealed that the disclosure of KAMs has significantly affected the investors decisions measured by the abnormal trading volume, Our findings suggest that the mandating of KAM’s disclosure has informational value to the investors.

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Are Auditor and Audit Committee Report Changes Useful to Investors? Evidence from the United Kingdom

Cited by 26 publications

References 46 publications

Comments of the Standards Committee of the Auditing Section of the American Accounting Association on the SEC's Concept Release No. 33-9862; 34-75344 File No. S7-13-15, Possible Revisions to Audit Committee Disclosures

Comments of the Standards Committee of the Auditing Section of the American Accounting Association on the SEC's Concept Release No. 33-9862; 34-75344 File No. S7-13-15, Possible Revisions to Audit Committee Disclosures

Key Audit Matters for Production-To-Order Industry and Conservatism

The Investors Reaction to the Disclosure of Key Audit Matters: Empirical Evidence from Jordan

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