The promoting effect of key audit matters on auditors' sense of responsibility: -- From the perspective of earnings management direction

Wenhui Hou

doi:10.54691/bcpbm.v18i.575

Authors

Wenhui Hou

DOI:

https://doi.org/10.54691/bcpbm.v18i.575

Keywords:

KAM, direction of earnings management, OLS regression, auditor's sense of responsibility

Abstract

IAASB and China's new audit reporting guidelines make improvements to the traditional audit report disclosure, focusing on adding disclosure of key audit matters (KAM) in the audit report, which may enhance auditor's sense of responsibility. This paper empirically analyses the promoting effect of KAM on auditor's sense of responsibility, using a sample of Chinese A-share listed companies in 2020, mediated by the direction of enterprise earnings management. Using OLS regression analysis, it is found that KAM has little effect on the positive enterprise earnings management, but a significant negative relationship on negative earnings management. In addition, it is found that: when the auditor issues a standard unqualified opinion, the trend of the negative relationship between KAM and negative enterprise earnings management can be significantly proved. Since the negative enterprise earnings management is increasing based on "accounting conservatism", this paper concludes that auditors need to improve their awareness of their responsibility.

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