Market reaction to the expanded auditor's report: Evidence from Taiwan

Abstract

To enhance the informative value of the audit report in 2016 Taiwan passed standards that change the structure of the audit report and require auditors to disclose key audit matters (KAMs) These changes have made a significant effect on Taiwan’s audit environment This paper documents investor reaction to the report's public release in the years immediately before and after the new standards along with the number and length of KAMs This study uses the absolute value of the cumulative abnormal return and abnormal trading volume to measure investor responses which represent the information content of audit report The results show that there is no price reaction to the expanded report's public release number and length of KAMs Further the report's public release and the number of KAMs are associated with a significantly higher abnormal trading volume but there is no volume reaction to the length of KAMs These results suggest that the expanded audit report is more informative than the traditional one Besides the greater the number of KAMs the more information there is present in the audit report

Date of Award	2019
Original language	English
Supervisor	Yu-Chen Lin (Supervisor)