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Determinants and Outcomes of Goodwill Impairment Key Audit Matters

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Date Issued:
2021
Abstract/Description:
The addition of Key Audit Matters (KAM) to standard audit reports is one of the most significant changes to the audit report in decades. However, research on the informativeness of KAMs to investors is mixed. I add to this literature by examining whether variation in how goodwill impairment KAMs (GIKAM) are determined influence their informativeness. I first develop a determinants model to predict when an audit client would receive a GIKAM and find that auditor quality (Big 4) and auditor independence (fee ratio) are negatively associated with the likelihood a client receives a GIKAM. I then use this model to create measures of unexpected GIKAMs to test the relationship between unexpected GIKAMs and market outcomes (price and volume). Using annual report date and three-day cumulative abnormal returns and abnormal trading volume, I find no relationship between unexpected GIKAMs and price or volume reactions. In my third hypothesis, I predict and find that GIKAMs are positively associated with goodwill impairment recognition using pooled and propensity score matched samples. These findings contribute to the growing literature on the usefulness of expanded audit reports as well as audit literature in general.
Title: Determinants and Outcomes of Goodwill Impairment Key Audit Matters.
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Name(s): Carlson, Tyler, author
Kohlbeck, Mark, Thesis advisor
Florida Atlantic University, Degree grantor
School of Accounting
College of Business
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Created: 2021
Date Issued: 2021
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 151 p.
Language(s): English
Abstract/Description: The addition of Key Audit Matters (KAM) to standard audit reports is one of the most significant changes to the audit report in decades. However, research on the informativeness of KAMs to investors is mixed. I add to this literature by examining whether variation in how goodwill impairment KAMs (GIKAM) are determined influence their informativeness. I first develop a determinants model to predict when an audit client would receive a GIKAM and find that auditor quality (Big 4) and auditor independence (fee ratio) are negatively associated with the likelihood a client receives a GIKAM. I then use this model to create measures of unexpected GIKAMs to test the relationship between unexpected GIKAMs and market outcomes (price and volume). Using annual report date and three-day cumulative abnormal returns and abnormal trading volume, I find no relationship between unexpected GIKAMs and price or volume reactions. In my third hypothesis, I predict and find that GIKAMs are positively associated with goodwill impairment recognition using pooled and propensity score matched samples. These findings contribute to the growing literature on the usefulness of expanded audit reports as well as audit literature in general.
Identifier: FA00013819 (IID)
Degree granted: Dissertation (Ph.D.)--Florida Atlantic University, 2021.
Collection: FAU Electronic Theses and Dissertations Collection
Note(s): Includes bibliography.
Subject(s): Auditing
Auditors' reports
Persistent Link to This Record: http://purl.flvc.org/fau/fd/FA00013819
Use and Reproduction: Copyright © is held by the author with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
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Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.