Informativeness of the Expanded Audit Report: Evidence from China

Goh, Beng Wee; Lee, Jimmy; Li, Dan; Wang, Muzhi

doi:10.2139/ssrn.3432107

Cited by 21 publications

(20 citation statements)

References 52 publications

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“…36 In contrast, another study by Zeng et al (2020) finds an incremental audit quality after the adoption of the expanded report for companies in Mainland China. Finally, Goh et al (2019) find an incremental market reaction to the expanded report for companies in Mainland China. Liao et al (2019), Zeng et al (2020), andGoh et al (2019) take different approaches in dealing with the one-time implementation of the rules in these jurisdictions.…”

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confidence: 96%

“…Finally, Goh et al (2019) find an incremental market reaction to the expanded report for companies in Mainland China. Liao et al (2019), Zeng et al (2020), andGoh et al (2019) take different approaches in dealing with the one-time implementation of the rules in these jurisdictions. The divergence in their conclusions may be partially attributable to research design choices.…”

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confidence: 96%

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The art of conversation: the expanded audit report

Minutti‐Meza

2021

Accounting and Business Research

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The new generation of expanded audit reports includes disclosures about significant matters in a company's financial reporting and its audit. These disclosures are a landmark change in auditors' responsibility to provide information to the public. I examine expanded reports in various jurisdictions, why they became mandatory, what the evidence from their implementation is, and whether they have fulfilled the expectations of regulators and other stakeholders. Expanded reports are intended to increase the information content and usefulness of audit opinions, to increase external monitoring of auditors and management, and to foster a more open conversation between auditors and users of financial reporting. However, existing regulatory requirements, conflicting auditors' incentives to provide new information, and evidence from the expanded reports' implementation call into question whether these objectives have been met. It is my hope that expanded reports are only a first step towards enhanced auditor reporting.

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confidence: 96%

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confidence: 96%

The art of conversation: the expanded audit report

Minutti‐Meza

2021

Accounting and Business Research

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“…In cross-sectional analysis, they did not find that variation in the content of the auditor report influence the informativeness of investors. Opposite to Liao et al (2019), Goh et al (2019) find higher abnormal trading volume, higher earnings response coefficient, and lower price synchronicity in China. Furthermore, they find that these effects are more substantial for smaller firms, state-owned firms, and firms with less analyst following.…”

Section: Empirical Backgroundmentioning

confidence: 83%

“…Moreover, they find that in weaker information environments the new disclosure regime is more effective in reducing the information asymmetry while they conclude that the additional required disclosures from audit committees and auditors (CAM) provide new and relevant information to market participants while they decrease information asymmetry. Goh et al (2019) provide evidence for an emerging market that abnormal trading volume and earnings response coefficients are higher after the adoption of new regulatory requirements regarding CAMs. Other archival research did not find significant results (Bédard et al, 2019;Gutierrez et al, 2018;Liao et al, 2019).…”

Section: Empirical Backgroundmentioning

confidence: 95%

“…Most prior research, however, has failed to detect a significant market reaction. So far, only Reid et al (2015) in the UK and Goh, Li, and Wang (2019) in China have found archival results of a significant market reaction to extended auditor reports. Other archival research did not find significant results (Bédard, Gonthier-Besacier, & Schatt, 2019;Gutierrez, Minutti-Meza, Tatum, & Vulcheva, 2018;Liao, Minutti-Meza, Zhang, & Zou, 2019).…”

Section: Introductionmentioning

confidence: 99%

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The Influence of Critical Audit Matters in the US on the Informativeness of Investors

Spaargaren

Sikalidis

Γεωργακόπουλος

et al. 2022

Sci. Ann. Econ. Bus.

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In 2017, the PCAOB announced its new audit standard, AS 3101. One requirement is reporting critical audit matters (CAMs), starting June 30, 2019, for large accelerated filers. Using US data of CAM, we investigate whether the reporting of CAMs is informative for investors using a difference-in-differences approach and we use as proxies for investors’ informativeness, absolute abnormal returns and abnormal trading volume. Our motivation is to assess the relevance and the effectiveness of a new regulation aiming to improve audit quality. Overall, our findings provide some indications that the first-time implementation of CAMs might lead to investors avoiding those companies presumably because of uncertainty about the information being released. We also investigate the content of the CAM paragraph and do not find that the number, categories, or firm-specific/industry-common CAMs are value-relevant for investors. The results of this study provide insight into the new US auditor standard and the value-relevance of CAMs for investors. We suggest that standard setters should aim to improve the auditor report to make it more informational. Overall, our paper provides some evidence on the implementation and communicative value of the new CAM reporting, suggesting that CAMs are not informative for investors. We argue that this is the case potentially due to the additional information from CAMs which leads to complex information or information overload making investors less reluctant to invest on the companies with a significant number of CAMs reported.

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Expanded auditor’s reports and voluntary disclosure

Huang,

Xu,

et al. 2024

Journal of Contemporary Accounting & Economics

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Informativeness of the Expanded Audit Report: Evidence from China

Cited by 21 publications

References 52 publications

The art of conversation: the expanded audit report

The art of conversation: the expanded audit report

The Influence of Critical Audit Matters in the US on the Informativeness of Investors

Expanded auditor’s reports and voluntary disclosure

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