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Investor reactions to key audit matters: Financial and non‐financial contexts

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  • Hien Hoang
  • Robyn Moroney
  • Soon‐Yeow Phang
  • Xinning Xiao

Abstract

We investigate how a disclosed risk item and key audit matter (KAM) relatedness combine to affect investors' riskiness assessment in financial and non‐financial contexts. When management disclose a high‐risk item, we find that investors react the same way across contexts with KAM relatedness having no effect. When management disclose a low‐risk item, investors react differently in each context. When a KAM is related to the disclosed financial (non‐financial) low‐risk item, investors assess investment riskiness higher (lower) than when a KAM is unrelated to the low‐risk item. Our findings indicate the varying communicative value of KAMs across financial and non‐financial contexts.

Suggested Citation

  • Hien Hoang & Robyn Moroney & Soon‐Yeow Phang & Xinning Xiao, 2023. "Investor reactions to key audit matters: Financial and non‐financial contexts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3325-3349, September.
    • Handle: RePEc:bla:acctfi:v:63:y:2023:i:3:p:3325-3349
    DOI: 10.1111/acfi.13041
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