The Research on the Decision Usefulness of Idiosyncratic Information in Extended Audit Reporting:Based on a Perspective of Text Similarity
Improving the communication value of audit reporting is crucial to the efficiency of the capital market.From the perspective of text similarity in critical audit matters(CAM)disclosure,this paper empirically examines the decision usefulness of idiosyncratic information in extended audit reporting.Using the sample of China's A-share listed companies between 2017 and 2020,we find that the horizontal textual similarity(HTS)of CAM disclosure compared with other companies in the same industry in the same period is negatively correlated with the cumulative abnormal returns(CAR).In addition,this paper finds that the decision usefulness of HTS in CAM primarily stems from the paragraph of risk description rather than the auditor responses.Additional analyses indicate that these findings are predominated in the companies with poorer information environment,those audited by industry experts,as well as companies with more sophisticated investors.The research shows that idiosyncratic disclosure of extended audit reporting has decision usefulness,providing empirical support and reference for the reform of audit report model.
Extended audit reportingDisclosure of critical audit mattersDecision usefulnessText similarity