Research On The Impact Of Auditor Industry Expertise On Key Audit Matters

In order to align with international auditing standards and to increase the quality of audit reports and meet the information needs of investors,our Ministry of Finance issued new auditing standards in December 2016 to reform audit reports.One of the most important aspects of the audit report reform is the communication of key audit matters.However,there is still a trend of boilerplate disclosure of key audit matters by accounting firms,and the incremental information has still not been significantly enhanced.When there is a change in the industry expertise of the accounting firm engaged by the audited entity,will there be significant differences in the judgement and disclosure of key audit matters between accounting firms,thereby providing more incremental information? If differences in judgments and disclosures do exist,what causes the differences to exist?This paper takes all listed companies adopting the new auditing standards from 2017-2019 as the starting point,selects a sample of changes in the firm’s auditor’s industry expertise brought about by changes in the accounting firm it selects to engage,categorises the impact of the availability of the auditor’s industry expertise on the disclosure of key audit matters in adjacent years of the same company,and theoretically analyses the statistical results in terms of the influencing factors.On the basis of the above analysis,this paper selects representative cases from the analysis sample,lists the differences in disclosure of key audit matters before and after the change in industry expertise,and compares the above differences with the results of the statistical analysis of the differences in order to corroborate the above conclusions.Finally,the differences in the disclosure of key audit matters due to auditors’ industry expertise are further investigated and analysed on the basis of the relevant influencing factors mentioned above.After completing the statistical analysis and the corresponding case studies,the following conclusions are drawn.(1)Changes in auditors’ industry expertise have an overall impact on key audit matters;(2)The mechanism by which the auditor’s industry expertise affects key audit matters:the change in industry expertise,the difference in industry experience in terms of know-how due to the size effect of the firm,the difference in the auditor’s years of experience,and the difference in the auditor’s understanding of standards and guidance affect the auditor’s professional judgment and thus the disclosure of key audit matters.As a result,accounting firms with auditor expertise exhibit more of their own characteristics in the disclosure of key audit matters than accounting firms without auditor expertise.(3)Case results: The analysis of the case of Lixin and Zhongxinghua audit of Hongsheng and Ruankong found that the key audit matters disclosed by Lixin had more characteristics of its own after Zhongxinhua,which did not have auditor expertise,changed to Lixin,which had auditor expertise.