Work

Peer effect of key audit matters disclosure

Year: 2025

Type: article

Abstract: Examining Chinese listed companies (2017–2021), we show that key audit matters (KAMs) disclosure exhibits a significant peer effect. We verify a rivalry-based theory of this effect. Audit firms with similar (vs. divergent) resource endowments are more likely to mimic peers’ KAMs disclosure, particularly when auditors face more intense competition and a more uncertain information environment. Material misstatement risks may dampen the peer effect for less economically significant clients and auditors with more industry specialists, suggesting that this effect reflects auditors’ rational cost–benefit trade-off. Finally, the peer effect expands audit market share but reduces KAMs’ communication value. Our findings enrich KAMs disclosure research and provide implications for enhancing audit report reforms and the communicative value of KAMs disclosure.

Source: China Journal of Accounting Research

DOI: 10.1016/j.cjar.2025.100445

Authors: Hengguang Wu, Xiangyan Shi, Xueman Zhang

Institution: Shandong University of Finance and Economics

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,800

Funders: Natural Science Foundation of Shandong Province, Social Science Planning Project of Shandong Province