The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review
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DOIhttp://dx.doi.org/10.21511/ppm.17(3).2019.26
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Article InfoVolume 17 2019, Issue #3, pp. 323-341
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This article presents a literature review of 49 empirical studies on key audit matter (KAM) disclosure in audit reports. The study involves a structured literature review on KAM disclosure based on the reactions of stakeholders. The limitations of former studies and useful recommendations for research are stressed. Five major streams of empirical research that analyze the impact of KAM disclosure on stakeholders’ reactions are focused: (1) shareholders (e.g. investors’ perceptions of auditors’ responsibility and litigation, value relevance and investors’ decisions); (2) debtholders (e.g. loan contracting terms); (3) external auditors (e.g. audit processes and audit fees); (4) boards of directors (e.g. earnings management); and (5) other stakeholders (e.g. informational value for suppliers and customers). The authors stress that most of the included studies use experimental or archival data and analyze the impact of KAM disclosure on investor reactions in a US-American setting. As the international standard setters assume a positive impact of KAM on stakeholder reactions, mixed empirical results are found. Although there are some indications of decreased earnings management behavior, most studies find no significant changes in auditor behavior. Furthermore, there are many insignificant results with regard to shareholders’ reaction in line with our stakeholder and behavioral agency framework. The literature review is especially useful for management decisions, because firm reputation may be positively or negatively influenced by KAM regulations.
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JEL Classification (Paper profile tab)M410, M420
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References73
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Tables7
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Figures2
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- Figure 1. Structure of the expectation gap
- Figure 2. Research framework
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- Table 1. KAM and other extended auditor reporting variables
- Table 2. Count of published papers cited
- Table 3. Overview of empirical research regarding the impact of KAM and other related information on shareholders
- Table 4. Overview of empirical research regarding the impact of KAM and other related information on debtholders
- Table 5. Overview of empirical research regarding the impact of KAM and other related information on auditors
- Table 6. Overview of empirical research regarding the impact of KAM and other related information on boards of directors
- Table 7. Overview of empirical research regarding the impact of KAM and other related information on other stakeholders
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The relationship between corporate social responsibility and earnings management: accounting for endogeneity
Hyunjung Choi , Byungchul Choi
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Jungyoon Byun
doi: http://dx.doi.org/10.21511/imfi.15(4).2018.06
Investment Management and Financial Innovations Volume 15, 2018 Issue #4 pp. 69-84 Views: 4589 Downloads: 537 TO CITE АНОТАЦІЯThis study examines the relationship between corporate social responsibility (CSR) and earnings management after controlling for endogeneity of CSR. Using a sample of non-financial firms listed on Korean Securities Market between 2002 and 2010, this study finds that ignoring endogeneity biases the estimated relation between CSR and earnings management. Specifically, the results show that the negative and significant relation between CSR commitment and discretionary accruals reported in the previous studies becomes insignificant. However, the negative and significant relation between CSR commitment and real activities manipulation remains significant even when the endogeneity of CSR commitment is taken into account. Therefore, this study provides evidence that proactive CSR engagement significantly affects firm’s practice of real activities manipulation, while it does not affect its practice of discretionary accruals. These results indicate that CSR commitment leads managers to be more responsible in management of operational activities than in accruals management.
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Impact of corporate governance mechanisms on financial reporting quality: a study of Indian GAAP and Indian Accounting Standards
Faozi A. Almaqtari 
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Abdulwahid Abdullah Hashed ,
Mohd Shamim ,
Waleed M. Al-ahdal
doi: http://dx.doi.org/10.21511/ppm.18(4).2020.01
Problems and Perspectives in Management Volume 18, 2020 Issue #4 pp. 1-13 Views: 2921 Downloads: 607 TO CITE АНОТАЦІЯThe present study examines the impact of corporate governance mechanisms on financial reporting quality under Indian GAAP and Indian Accounting Standards (Ind. AS). A sample of 97 companies listed on the Bombay Stock Exchange is selected. Corporate governance mechanisms have been considered as independent variables, and financial reporting quality is the dependent variable. Corporate governance is measured by board effectiveness (board size, independence, diligence, and expertise), audit committee attributes (size, independence, diligence, and expertise), foreign ownership, and audit quality. Descriptive statistics, correlation, and OLS regression are conducted to estimate the results. The study results reveal that board characteristics and audit committee attributes, except for audit committee diligence, have a significant effect on financial reporting quality. However, the impact of board diligence and audit committee attributes is negative. Foreign ownership has no contribution to financial reporting quality, but audit quality has a significant effect. The findings of the study have considerable implications for regulators, policymakers, managers, investors, analysts, and academicians. More emphasis should be given to compliance with Ind. AS, and an oversight body for compliance with Ind. AS should be established.
Acknowledgment
This publication was supported by Deanship of Scientific Research, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia. -
The effect of the ownership structure on earnings management practices
Sanaa Maswadeh
doi: http://dx.doi.org/10.21511/imfi.15(4).2018.04
Investment Management and Financial Innovations Volume 15, 2018 Issue #4 pp. 48-60 Views: 2260 Downloads: 288 TO CITE АНОТАЦІЯThe objective of this study is to investigate the effect of the ownership structure, which includes concentration ownership, institutional ownership and foreign ownership in the light of the debt ratio and company size as controlling variables in limiting the earnings management practices of the Jordanian industrial companies for the period 2012–2016. The hypotheses of the study were tested using the multiple regression models. Among the most prominent findings of the study are: the explanatory factor (R2) for the independent and control variables accounts for 38% of the change in the earnings management of the Jordanian industrial companies, moreover, a significant effect of the concentration ownership was found in the limitation of earnings management practices; while, there was no significant influence of institutional ownership and foreign ownership on the earnings management practices in Jordanian industrial companies. Major limitation to this study is the only considered listed industrial Jordanian firms. Thus, the generalization of the results to other sectors and diverse economic conditions and regulations may be constrained. Finally, Jordanian policymaker reform policies motivate companies to increase their interest on concentration ownership structure, as the study showed the significant effect of the concentration ownership in the limitation of earnings management practice.
