Informativeness of the Expanded Audit Report: Evidence from China

64 Pages Posted: 8 Aug 2019 Last revised: 10 Apr 2020

See all articles by Beng Wee Goh

Beng Wee Goh

Singapore Management University - School of Accountancy

Dan Li

Tsinghua University - School of Economics and Management

Muzhi Wang

Central University of Finance and Economics (CUFE) - School of Accountancy

Date Written: August 5, 2019

Abstract

This study investigates whether the expanded audit report is informative to investors in the setting of an emerging economy. Using the recent staggered adoption of the expanded audit report for A+H and A share firms in China, we find robust evidence that abnormal trading volume and earnings response coefficients are higher, and stock price synchronicity are lower, in the post-adoption periods than in the pre-adoption periods. In additional tests, we find that the expanded audit report is more informative for non-State Owned Enterprises and for firms with higher information asymmetry. To the best of our knowledge, our study is the first to document systematic evidence that the expanded audit report is incrementally informative to investors in an emerging economy.

Keywords: expanded audit report, information conten, key audit matters

JEL Classification: M41, M42, M48

Suggested Citation

Goh, Beng Wee and Li, Dan and Wang, Muzhi, Informativeness of the Expanded Audit Report: Evidence from China (August 5, 2019). Singapore Management University School of Accountancy Research Paper No. 2019-104, Available at SSRN: https://ssrn.com/abstract=3432107 or http://dx.doi.org/10.2139/ssrn.3432107

Beng Wee Goh (Contact Author)

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

Dan Li

Tsinghua University - School of Economics and Management ( email )

Beijing, 100084
China

Muzhi Wang

Central University of Finance and Economics (CUFE) - School of Accountancy ( email )

Beijing
China

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