Gambling Preference and Audit Decision-Making—From the Perspective of Key Audit Matters Disclosure

Hangeng Qiu (), Pu-yan Nie, Wei Jiang (), Hongxing Wen () and Baoyin Qiu ()
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Hangeng Qiu: Guangdong University of Finance and Economics
Wei Jiang: Shanghai University of Finance and Economics
Hongxing Wen: Hunan Agricultural University
Baoyin Qiu: Hangzhou Dianzi University

Journal of Business Ethics, 2025, vol. 202, issue 1, No 6, 97-115

Abstract: Abstract Using a novel Chinese gambler conviction database to proxy the local gambling preference, we examine the impact of gambling preference on the disclosure of key audit matters (KAMs). Our findings suggest that the number of KAMs is significantly greater for firms in cities with a strong gambling preference than for firms in cities with a weak gambling preference. Our results are consistent with the view that firms located in areas with a sin culture may improve the quality of their financial reports to overcome their stigmatized image. Additional analysis suggests that large audit firms, shorter audit terms, and closer audit-client distance strengthen the positive relationship between the gambling preference and the disclosure of KAMs. Namely, audit firms with a good reputation, strong independence, and information advantages play a more significant role in “destigmatization”. Finally, we show that auditors charge more audit fee and exert more audit effort towards clients located in areas with a strong gambling preference. This finding suggests that attempts by firms that are affected by a sin culture to achieve “destigmatization” by improving the quality of their financial reports are also costly.

Keywords: Gambling preference; Key audit matters; Local culture; Stigmatization (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10551-024-05910-w

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