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Critical audit matters : possible market misinterpretation
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Klevak, Julia, Livnat, Joshua, Pei, Duo (Selina) and Suslava, Kate (2023) Critical audit matters : possible market misinterpretation. AUDITING: A Journal of Practice & Theory, 42 (3). pp. 45-70. doi:10.2308/ajpt-2020-113 ISSN 1558-7991.
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Official URL: https://doi.org/10.2308/ajpt-2020-113
Abstract
The Public Company Accounting Oversight Board (PCAOB) recently expanded audit reports to disclose Critical Audit Matters (CAMs) and the audit procedures used to address them. We study the first wave of CAM disclosers from July 2019 to May 2020, which included large accelerated filers reporting on their 2019 fiscal year results. We examine whether market participants erroneously perceive firms with more extensive CAM disclosures to be riskier than firms with less extensive CAM disclosures. We find that firms with more extensive CAM disclosures are associated with increased perceived uncertainty: stock prices of these firms are significantly more volatile and analysts’ forecasts are significantly more dispersed than those of firms with less extensive CAM disclosures.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HF Commerce > HF5601 Accounting | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
| SWORD Depositor: | Library Publications Router | ||||||||
| Library of Congress Subject Headings (LCSH): | Auditing, Finance, Public, Disclosure in accounting, Corporations -- Auditing, Auditing -- Standards | ||||||||
| Journal or Publication Title: | AUDITING: A Journal of Practice & Theory | ||||||||
| Publisher: | American Accounting Association | ||||||||
| ISSN: | 1558-7991 | ||||||||
| Official Date: | 1 August 2023 | ||||||||
| Dates: |
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| Volume: | 42 | ||||||||
| Number: | 3 | ||||||||
| Page Range: | pp. 45-70 | ||||||||
| DOI: | 10.2308/ajpt-2020-113 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 2 February 2023 | ||||||||
| Date of first compliant Open Access: | 2 February 2023 |
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