Study on The Governance Effect of Key Audit Matters Disclosure on Surplus Management

Abstract

With the help of audit Standard No.1504, the impact of key audit matters on earnings management is analyzed from the theory of corresponding inferences and from the perspective of auditors and management. Select the data of mainland and Hong Kong listed companies before and after the criteria, and design the PSM-DID model to test the policy effect. Empirically test the governance effect of key audit matters disclosure on earnings management. It is further found that the more key audit matters are disclosed, the more obvious the governance effect of the accrued surplus management and real surplus management of listed companies; among them, the governance effect of sample companies is the most obvious through the key audit matters at the account level. In addition, from the perspective of the specific types of asset impairment, the key audit matters related to inventory impairment, goodwill impairment and receivables impairment all reduce the surplus management of listed companies to a certain extent. The study shows that audit Standard No.1504 has improved the information quality of listed companies and promoted the development of high-quality capital market by suppressing surplus management behavior.