 Bright lines vs. blurred lines: When do critical audit matters influence investors' perceptions of management's reporting credibility?Michael E. Ozlanski Advances in accounting, 2019, vol. 45, issue C, - Abstract: The Public Company Accounting Oversight Board will soon require auditors to disclose critical audit matters (CAMs) to highlight areas of financial statements which are subject to a higher risk of material misstatement. Concurrently, the Financial Accounting Standards Board and the International Accounting Standards Board continue their efforts to converge both sets of accounting standards, and the newly converged revenue recognition standard contains a relatively limited amount of implementation guidance. I hypothesize and find that CAMs lower investors' perceptions of management's reporting credibility when the financial statement area discussed by CAMs is governed by precise, but not an imprecise, accounting standards. The emphasis of risks via CAMs is incongruent with investors' expectations about the ability of precise standards to reduce financial reporting risks. The results from this experiment with nonprofessional investors provide insights about the interaction between CAMs and accounting standards. Keywords: Audit reports; Management reporting credibility; Critical audit matters (CAMs); Accounting standard precision (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:45:y:2019:i:c:1 DOI: 10.1016/j.adiac.2019.04.001 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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