Informativeness of the Expanded Audit Report: Evidence from China
64 Pages Posted: 8 Aug 2019 Last revised: 10 Apr 2020
Date Written: August 5, 2019
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: Suggested Citation