The Effects Of Critical Audit Matters On The Quality Of Analysts Earnings Forecasts

In order to enhance the information content of audit reports and meet the information demand of the capital market,the Ministry of Finance of China promulgated new audit reporting standards at the end of 2016.The core of new standards is to require auditors to disclose critical audit matters in audit reports,that is,auditors should select the matters that have the greatest impact on current financial report audit as critical audit matters,and explain the reasons and the audit countermeasures in the audit reports.In order to test whether critical audit matters has incremental information value,this paper firstly uses quasi-natural experimental environment created by the implementation of new auditing reporting standards in A+H-share companies in 2016,and adopts the method of propensity score matching and difference-in-differences model(PSM-DID)to test the impact of disclosing critical audit matters on the quality of analyst earnings forecasts.Secondly,this paper reveals the essence of risk information of critical audit matters,and examines the relationship between the content of risk information on critical audit matters and the quality of analysts earnings forecasts,and then consider the moderating role of company transparency of information on the above relationship.The results of this paper show that,firstly,the disclosure of critical audit matters significantly improves the accuracy of analyst forecasts and reduces the dispersion,indicating that the disclosure of critical audit matters improves the quality of analysts earnings forecasts,and proving incremental information value.Secondly,the more risk information contained in the critical audit matters,the higher the accuracy of analyst forecasts and the lower the dispersion of analyst forecasts,which indicates that the more auditors fully explain the risks behind critical audit matters,the lower the uncertainty faced by analysts in making earnings forecasts,the higher the accuracy of earnings forecasts and the lower the dispersion.Further,the research in this paper finds that the relationship between the risk information content of critical audit matters and the analysts earnings forecasts accuracy and dispersion is mainly reflected in companies with low information transparency.The research in this paper not only deepens the test of incremental information value of critical audit matters,but also reveals the essence of the risk information of critical audit matters.Based on this,it analyzes the impact of the risk information content of critical audit matters,which expands the related research on the analysis of the information content of critical audit matters.It will provide a reference for regulators and other relevant persons who are concerned about the effectiveness and problems of the implementation of the new standard,and also provide a reference for the in-depth study of critical audit matters.