Mandatory disclosure of key audit matters and the choice of earnings management

作者：Xiaoqi Chen, Maoliang Li, Dorcas Nduakoh, Ling Na Belinda Yau · 发表于：Accounting and Finance · 年份：2024 · DOI：10.1111/acfi.13331 · 被引用次数：7 · 研究领域：Auditing, Earnings Management, Governance、Financial Reporting and Valuation Research、Corporate Finance and Governance

Abstract This paper examines client managers' earnings management choices following the adoption of mandatory reporting on key audit matters in the UK. Using a difference‐in‐differences design, we find that managers engage less in accrual‐based earnings management and more in real earnings management after the introduction of key audit matter (KAM) reporting. With textual data, we show that the disclosure characteristics (such as specificity, similarity, readability and length) and types of KAMs also affect the choice of earnings management. The decrease in accrual‐based earnings management is eclipsed by the increase in real earnings management; thus, total earnings management does not change significantly.