Key Audit Matters Reports in China: Their Descriptions and Implications of Audit Quality

What is it about?

We examine what information the key audit matters (KAM) reports disclose and how the KAM reports relate to audit quality. By analyzing textual and archival data related to the Chinese regulation of KAM reporting, we find that auditors report both industry-generic and firm-specific KAMs, and the wordings to a large extent are firm specific and differ in KAM reporting components. We also find that the characteristics of KAM reports comprehend audit quality in that the number of KAMs and disclosure characteristics in terms of specificity, similarity, readability and length reflect auditors' concerns about clients' financial statement quality.

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