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Determinants and consequence of critical audit matter disclosure: early evidence

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  • Yan Luo

    (San Diego State University)

Abstract

The Public Accounting Oversight Board’s Audit Standard 3101 (AS 3101), which requires auditors to disclose critical audit matters (CAMs), became effective for audits of large accelerated filers with fiscal years ending on or after June 30, 2019, and for all other US public companies on December 15, 2020. This initiative is a response to the gap between the users’ demand and the information provided in auditors’ reports. It is also intended to improve the relevancy of auditors’ reports. Focusing on studies of the determinants and consequence of CAMs disclosure in the US setting, this review complements and extends previous syntheses of research on expanded audit disclosures in non-US settings. More importantly, it provides preliminary insights into whether AS 3101 achieves its stated objective: making auditors’ reports more informative and more relevant to investors. This review also highlights areas where there is limited research or inconsistent results, which may help academic researchers to identify opportunities for future research.

Suggested Citation

  • Yan Luo, 2021. "Determinants and consequence of critical audit matter disclosure: early evidence," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(4), pages 336-345, December.
    • Handle: RePEc:pal:ijodag:v:18:y:2021:i:4:d:10.1057_s41310-021-00112-6
    DOI: 10.1057/s41310-021-00112-6
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    References listed on IDEAS

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    1. Steven J. Kachelmeier & Dan Rimkus & Jaime J. Schmidt & Kristen Valentine, 2020. "The Forewarning Effect of Critical Audit Matter Disclosures Involving Measurement Uncertainty," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2186-2212, December.
    2. Jean H. Bédard & Nathalie Gonthier-Besacier & Alain Schatt, 2019. "Consequences of Expanded Audit Reports : Evidence from the Justifications of Assessments in France," Post-Print hal-02011144, HAL.
    3. Lauren C. Reid & Joseph V. Carcello & Chan Li & Terry L. Neal & Jere R. Francis, 2019. "Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom," Contemporary Accounting Research, John Wiley & Sons, vol. 36(3), pages 1501-1539, September.
    4. Elizabeth Gutierrez & Miguel Minutti-Meza & Kay W. Tatum & Maria Vulcheva, 2018. "Consequences of adopting an expanded auditor’s report in the United Kingdom," Review of Accounting Studies, Springer, vol. 23(4), pages 1543-1587, December.
    5. Lennox, Clive, 2005. "Audit quality and executive officers' affiliations with CPA firms," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 201-231, June.
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    Cited by:

    1. Chen, Lihong & Xiao, Tingting & Zhou, Jia, 2023. "Do auditor changes affect the disclosure of critical audit matters? Evidence from China," Economic Modelling, Elsevier, vol. 122(C).
    2. Linda Azlinda Sahlan & Phua Lian Kee & Lok Char Lee, 2024. "Audit Quality through KAMs: A Pathway to More Conservative and Reliable Financial Reporting," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(12), pages 3102-3112, December.

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