Does Critical Audit Matters Disclosure Mitigate Asset Mispricing?
This paper examines the impact of critical audit matters disclosure on the asset mispricing and its internal mechanism through constructing a difference-in-difference model.It has been found that critical audit matters disclosure significantly mitigates asset mispricing,that is,the stock price can reflects the firm's actual value better.Reducing heterogeneous belief and promoting private information collection are two main channels that can explain the above relation.Cross-sectional tests show that the impact of critical audit matters disclosure on asset mispricing is more pronounced in samples with poorer information environment,better industry expertise auditors and lower institutional ownership.Additional tests reveal that the intonation,readability,similarity and adequacy of critical audit matters disclosure could also influence asset mispricing to some extent.This study not only expands the research perspectives of critical audit mat-ters disclosure and asset mispricing,but also sheds new light onbothaccurateevaluationof the real effect of audit report reform and effective mitigation of asset pricing.
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