Are All Auditors the Same? A Topic Analysis of Expanded Audit Reports

54 Pages Posted: 18 Feb 2021 Last revised: 26 Apr 2022

See all articles by Peng-Chia Chiu

Peng-Chia Chiu

The Chinese University of Hong Kong, Shenzhen

Donghui Wu

The Chinese University of Hong Kong; Center for Institutions and Governance

Belinda Yau

The Hang Seng University of Hong Kong

Date Written: April 26, 2022

Abstract

We investigate whether and how auditor heterogeneity affects key audit matters (KAMs) of auditing and reporting in the expanded audit reports in the United Kingdom. By using hand-collected audit-report data and manual categorization, we first present descriptive evidence of auditors’ heterogeneity on KAM-topic choices and corresponding audit procedures. We then document that, when there is an auditor switch, the incoming auditor tends to change the KAMs and the corresponding audit procedures. In addition, the incoming auditor is more likely to identify new KAMs that are worth audit attention, supporting the notion that auditor change can bring a fresh perspective to the audit. Overall, we find that audit firms are heterogeneous in KAM-topic selection and audit-procedure choices.

Keywords: audit report; topic study; audit procedure; reporting style; KAM

Suggested Citation

Chiu, Peng-Chia and Wu, Donghui and Yau, Ling Na Belinda, Are All Auditors the Same? A Topic Analysis of Expanded Audit Reports (April 26, 2022). Available at SSRN: https://ssrn.com/abstract=3780889 or http://dx.doi.org/10.2139/ssrn.3780889

Peng-Chia Chiu

The Chinese University of Hong Kong, Shenzhen ( email )

Donghui Wu

The Chinese University of Hong Kong ( email )

Sha Tin
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Hong Kong
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852-2603 5114 (Fax)

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Center for Institutions and Governance ( email )

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HOME PAGE: http://www.bschool.cuhk.edu.hk/centres/centre-for-institutions-and-governance/

Ling Na Belinda Yau (Contact Author)

The Hang Seng University of Hong Kong

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China
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